By Moaaz Manzoor

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed targeted tax incentives for renewable energy and medical device manufacturing in the federal budget FY2026-27, saying that greater fiscal support for emerging sectors can encourage domestic production, attract investment, and reduce pressure on foreign exchange reserves.

According to the FPCCI budget proposals document available with Wealth Pakistan, the business body recommended tax relief on imported renewable energy equipment, tax holidays for medical device manufacturers, and stronger incentives for investment in plant, machinery, and technology infrastructure.

FPCCI noted that Pakistan continues to spend between $15 billion and $18 billion annually on energy imports, creating pressure on the rupee, foreign exchange reserves, and the country's external account.

The chamber stated that dependence on imported energy also contributes to circular debt and increases production costs for industries that rely heavily on an uninterrupted and affordable electricity supply.

To address these challenges, FPCCI proposed tax relief for imported renewable energy equipment and machinery that are not manufactured locally for a period of five years.

According to the organization, lower taxation on such imports could facilitate investment in alternative energy projects and reduce energy costs for industries over time.

The chamber maintained that improved access to renewable energy technologies may also support broader industrial competitiveness by reducing dependence on imported fuels and creating a more stable energy supply environment.

FPCCI also highlighted opportunities in the healthcare manufacturing sector.

According to the document, Pakistan imports healthcare devices worth approximately $500 million annually, creating additional pressure on foreign exchange outflows.

The business body proposed a five-year tax holiday for new medical device manufacturing and export units to support local production and encourage investment in the sector.

It stated that fiscal incentives could help establish domestic manufacturing capacity and contribute to import substitution while creating employment opportunities.

FPCCI further recommended allowing 100% depreciation in the first year on plant and machinery used for healthcare device manufacturing.

According to the chamber, the industry requires significant capital investment and depends on technology-intensive equipment that can become obsolete relatively quickly.

The document noted that accelerated depreciation could encourage businesses to invest in modern manufacturing systems and improve industrial productivity.

The chamber also proposed introducing a 10% tax credit for businesses reinvesting profits into new plant, machinery, and digital infrastructure.

According to FPCCI, stronger incentives for technology upgrades and expansion projects can support industrial modernization and increase economic activity.

The organization maintained that targeted incentives for emerging sectors can help strengthen local manufacturing, reduce import dependence, and create a more diversified industrial base for long-term economic growth.

Credit: INP-WealthPk