ISLAMABAD: The government’s much-touted off-grid levy on captive power plants (CPPs) has failed to deliver the expected windfall, with revenue collections set to fall drastically short of the Rs105 billion target as industrial gas consumption plunges.
For April, May, and June 2025, the levy was fixed at Rs570, Rs550, and Rs402 per MMBTU respectively. Yet official data shows gas usage by CPPs has collapsed—from 150 mmcfd to just 26 mmcfd in the SNGPL region, and from 200 mmcfd to 95 mmcfd elsewhere—against budget assumptions of 350 mmcfd.
The shortfall stems from steep cost hikes under IMF-backed reforms. Gas prices for CPPs were raised to Rs3,500 per MMBTU, alongside a phased levy starting at 5% in February 2025 and set to climb to 20% by August 2026. At an effective cost of $15.36 per MMBTU—well above international LNG rates—CPP-based generation has become commercially unviable.
Instead of shifting to grid electricity as the government intended, many factories have cut gas usage entirely, turning to biomass, bagasse, and even wood-fired systems to meet export orders. This has worsened the textile sector’s competitiveness, already under strain from high input costs and shrinking exports.
The levy has also triggered a turf battle: the Power Division wants revenues used to lower electricity tariffs, while the Finance Ministry is holding onto the funds for fiscal targets. With the issue unresolved, it is expected to feature prominently in Pakistan’s IMF review on September 15.
The collapse of the levy underscores the risks of miscalculated energy reforms—threatening industrial productivity, export earnings, and investor confidence in Pakistan’s energy sector.
Story by Khalid Mustafa
