KARACHI: Pakistan has secured conditional approval from the International Monetary Fund (IMF) to revise the formula for calculating the captive gas levy, potentially reducing gas costs for industrial consumers by up to 60 percent.
According to reports, the revised mechanism will replace the current formula, based solely on the peak B3 industrial electricity tariff, with a weighted average of peak and off-peak B3 rates. The change is expected to significantly lower the levy burden on industries operating captive power plants for in-house electricity generation.
Under the current system, the captive gas levy stands at Rs1,303 per mmBtu. With the proposed revision, the levy could drop to around Rs522 per mmBtu. While the full 60 percent reduction may not apply every month, historical trends suggest industrial users could see levy cuts ranging from 30 to 60 percent.
The proposal was reportedly raised by Petroleum Minister Ali Pervaiz Malik during Pakistan’s third review talks with the IMF. While the Fund has agreed to the revised formula, it has maintained its broader policy stance aimed at discouraging gas-based captive power generation.
The IMF has rejected Pakistan’s requests to freeze the additional 15 percent levy and to exempt efficient captive plants from the charge. Instead, it has asked the government to proceed with increasing the levy to 20 percent, arguing the higher rate is necessary to push industries toward the national power grid.
The report said implementation of the revised formula will also be linked to electricity demand from the grid. If industrial demand falls, the government may be required to impose the 20 percent levy earlier than planned, possibly in July instead of August. In the event of a sharper drop in demand, the levy could rise above 20 percent.
The captive levy is designed to narrow the cost advantage of self-generation by linking gas prices to Nepra-notified industrial electricity tariffs and Ogra-notified gas rates. The policy aims to make captive generation less attractive and encourage industries to shift back to grid electricity.
Government officials have argued the levy has also negatively affected gas utilities. Sui companies reportedly posted losses of Rs104 billion in the first half of the current fiscal year, while collections from the captive power levy remained below expectations.
Meanwhile, industries have increasingly turned to alternatives such as rooftop solar to manage rising electricity costs, adding a new dimension to the country’s evolving energy policy.
