ISLAMABAD: Industrial representatives and the Power Division have called for the removal or reduction of petroleum levies on furnace oil and high-speed diesel (HSD) used in electricity generation, arguing that the charges are adding approximately Rs10 per unit to power costs and increasing the financial burden on consumers.
Thank you for reading this post, don't forget to subscribe!The demand was raised during a public hearing conducted by the National Electric Power Regulatory Authority (NEPRA) on the proposed Rs2.56 per unit monthly Fuel Cost Adjustment (FCA) for electricity consumed in September. The Central Power Purchasing Agency (CPPA) has requested permission to recover around Rs32.76 billion from consumers through November electricity bills.
Industrial representatives Amir Shaikh, Arif Bilwani, Tanveer Bari and Rehan Javed, representing various chambers of commerce and industry, argued that substantial petroleum levies were making expensive fuel-based electricity generation even costlier.
They pointed out that the government was charging approximately Rs76,000 per tonne on furnace oil and Rs80 per litre on diesel. They urged the government to reduce or eliminate these levies, particularly amid the regional energy crisis linked to the Iran conflict and disruptions in LNG supplies.
Representatives of the Power Division confirmed that furnace oil- and diesel-based power generation accounted for 3.6 per cent of total electricity generation in September, primarily due to the unavailability of LNG and other cheaper fuel sources.
According to industrial representatives, removing the petroleum levies could bring generation costs down from approximately Rs62 per unit to between Rs44 and Rs50 per unit. They also argued that the levies were increasing the government’s subsidy requirements, effectively transferring financial resources from one government account to another.
Industry representatives further called for the immediate suspension of the surplus incremental consumption package, arguing that its continuation was imposing an additional burden of around Rs11 per unit on grid-connected consumers.
Naveed Qaiser, Chief Financial Officer of the Power Planning and Monitoring Company (PPMC), acknowledged that petroleum levies on diesel and furnace oil had a substantial impact on electricity generation costs. He said the Power Division had been advocating their removal or reduction at relevant government forums and encouraged business representatives to continue raising the issue with senior officials.
Qaiser said reducing electricity tariffs, particularly for industrial consumers, remained a government priority to improve Pakistan’s competitiveness with regional economies. He added that government efforts had already helped reduce electricity tariffs by approximately Rs10 per unit for general consumers and up to Rs18 per unit for industrial consumers.
Explaining the proposed adjustment, CPPA representative Rehan Akhtar said the actual fuel cost of electricity generation in September stood at Rs10.022 per unit, compared with the reference fuel cost of Rs7.46 per unit. This resulted in a requested additional FCA of Rs2.56 per unit, with a total financial impact estimated at Rs32.76 billion.
However, he clarified that the net increase in the FCA would not exceed Rs1.45 per unit because the existing positive adjustment in October would expire and be replaced by the proposed adjustment in November.
The hearing also highlighted concerns over discrepancies in electricity generation data submitted by the CPPA. NEPRA officials and industrial representatives questioned the transparency and consistency of information provided by government entities.
Participants particularly questioned a previous Rs16 billion adjustment related to LNG prices, arguing that timely reporting of fuel prices could have prevented a significant portion of the additional FCA claim.
Officials from NEPRA’s Monitoring and Enforcement Division also raised questions about the authenticity and consistency of data submitted by government institutions. NEPRA Member Amina Ahmed acknowledged the concerns, saying the regulator was aware of the discrepancies but did not want to turn the proceedings into a public spectacle by addressing every inconsistency individually.
Industrial representatives also raised concerns about coal procurement practices at the Port Qasim power plant, alleging that coal was being purchased through affiliated companies at prices considerably higher than those paid by other power plants. They called for a comprehensive investigation, including by the National Accountability Bureau (NAB).
NEPRA assured participants that only prudent coal procurement costs would be approved and that any additional costs deemed unjustified would have to be borne by the power producer.
Meanwhile, government entities reported a 6.5 per cent increase in overall electricity demand during September, including a 6.7 per cent rise in industrial consumption. However, industry representatives argued that the increase reflected a shift from captive power generation to the national grid rather than the impact of the incremental consumption package.
According to CPPA data, the average fuel cost of electricity generation increased by nearly 37.5 per cent year-on-year in September. The increase was primarily attributed to greater reliance on expensive and heavily taxed fuels to compensate for reduced LNG supplies amid regional tensions and increased use of imported coal.
High-speed diesel accounted for 213 gigawatt-hours (GWh), representing approximately 1.6 per cent of total grid electricity supply, at an average generation cost of Rs62.14 per unit. This compared with 80GWh generated at Rs54 per unit in August.
Furnace oil-based generation, meanwhile, declined to 263GWh in September from 321GWh in August. Its generation cost also decreased to Rs44.86 per unit from approximately Rs46 per unit in the previous month, while its share of total electricity generation remained close to 2 per cent.
The hearing underscored the impact of expensive imported fuels, petroleum taxation and fuel supply disruptions on electricity tariffs, with industry representatives urging the government to review fuel levies and improve transparency in power procurement to reduce the cost of electricity.
Story by Khaleeq Kiani
