Pakistan government imposes PKR 791 levy on off-grid captive power plants

The Ministry of Energy has imposed a levy of PKR 791 ($2.8) per MMBTU on off-the-grid captive power plants, increasing the effective gas rate to PKR 4,291 per MMBTU.

According to the Gazette notification, “Every captive power plant will pay to the federal government a levy on the consumption of natural gas or RLNG, over and above the sale price notified by the Oil and Gas Regulatory Authority (OGRA).”

In January this year, the Economic Coordination Committee (ECC) approved raising the gas tariff for captive power plants from PKR 3,000 to PKR 3,500 per MMBTU for the fiscal year 2024-25, aiming to ensure the required revenue for the gas sector.

However, the committee decided against increasing the tariff for domestic consumers to protect them from additional financial burden.

The levy will be utilized by the federal government to reduce the power generation tariff for all consumer categories within the power sector.

The IMF mission had taken a tough stance on the ‘grid levy’ on the supply of natural gas or liquefied natural gas to industrial CPPs despite commitments.

Therefore, the government completed all formalities promptly to impose the Rs791 per million British thermal unit (MMBTU) grid levy, effective from March 7, 2025, and provided copies to the fund staff.

Under the said ordinance, the government will increase the grid levy by 10% in July 2025, followed by 15% in February 2026, and another 20% by August 2026, taking the end-price close to PKR 6,000 to make gas supply punitive for the industry to shift to the national power grid.

Pakistan largely met its targets for the end-December 2024 period, although some targets are expected to be delayed. Considering the timing of the first biannual review, forward-looking discussions significantly influenced policy talks for the next year's budget, which is due in the first week of June.

The budget proposals would pass through the IMF’s scrutiny before finalization, not only during ongoing talks but also subsequent virtual interactions.