ISLAMABAD: The government is preparing to raise the issue of the controversial off-grid levy on captive power plants (CPPs) with the visiting International Monetary Fund mission, amid reports of over Rs100 billion in losses to the gas sector and adverse impacts on exports.
Senior officials of the Petroleum Division said the levy, introduced under IMF programme conditions to shift industrial consumers towards grid electricity, has largely backfired. Although some increase in grid consumption was observed, it fell short of expectations due to inconsistent supply and technical disruptions — particularly in Karachi, where adequate electricity was not always available.
The levy was initially imposed at 5 percent in February 2025 and later raised to 10 percent in July 2025. It is scheduled to increase to 15 percent from February 2026 and 20 percent from August 2026, with monthly notifications issued since its introduction.
According to the December 2025 notification, the levy rose sharply to Rs1,248 per MMBtu, up from Rs850 in November. The hike reflects positive Fuel Charges Adjustment (FCA) and Quarterly Tariff Adjustment (QTA), along with the cumulative impact of the 10 percent levy.
Consequently, the effective gas cost for CPPs has surged to Rs4,748 per MMBtu, which climbs to approximately Rs5,600 per MMBtu after adding 18 percent GST — significantly raising input costs for industrial consumers.
Officials said Petroleum Minister Ali Pervaiz Malik had previously raised the issue with IMF representatives, but no formal response was received. The government is now expected to formally seek IMF approval to scrap or revise the levy during the upcoming review talks.
Story by Khalid Mustafa
