The federal government has lowered the levy on natural gas supplied to off-grid captive power plants to Rs343 per Million British Thermal Units (MMBTU) for August. The change, notified by the Ministry of Energy (Petroleum Division) under the Off the Grid (Captive Power Plants) Levy Act, 2025, represents a 76 percent drop from the peak rate of Rs1,406 per MMBTU charged in January.
Because money collected from this surcharge was designated to subsidise national grid users, the steep cut means electricity consumers will lose a significant part of the projected Re0.90 per unit tariff reduction previously promised to the International Monetary Fund (IMF).
Why the levy formula changed
Under Section 4 of the levy law, the monthly rate equals the difference between the industrial B3 tariff set by the National Electric Power Regulatory Authority (NEPRA) and the cost of self-generation based on gas rates fixed by the Oil and Gas Regulatory Authority (OGRA). Originally, the calculation relied exclusively on peak-hour B3 electricity tariffs.
During review discussions with the IMF, the government revised this framework to use an average of peak and off-peak B3 rates instead of peak-only numbers. This methodological change immediately lowered the rate from Rs1,303 in March to roughly Rs522 per MMBTU in April, followed by Rs500 in July and now Rs343 for August.
Industrial impact and revenue shortfalls
Pakistan introduced the phased surcharge of up to 20 percent on captive power generation in January 2025 as part of its IMF loan agreements. The tax was designed to discourage factories from generating their own thermal power off the grid and push them onto the surplus national transmission network.
When combined with the base gas tariff of Rs3,500, earlier levies pushed total fuel costs for industrial captive plants to nearly Rs4,900 per MMBTU. Facing prohibitive production costs, many factories shifted toward solar installations or grid connections, while others contested the charge in court. These operational shifts caused captive gas consumption to slide sharply, leaving the government well behind its annual revenue collection target of Rs105 billion for fiscal year 2025-26.
Timeline: what has happened so far
- January 2025: Pakistan introduces a phased levy of up to 20% on gas supplied to captive power units to meet IMF loan conditions.
- January 2026: Surcharge peaks at Rs1,406 per MMBTU under a formula based strictly on peak industrial power rates.
- February–March 2026: Levy settles at Rs1,303 per MMBTU as high energy costs spur factories to turn toward grid power and solar arrays.
- April 2026: Government agrees with the IMF to compute the levy using an average of peak and off-peak tariffs, reducing the fee to roughly Rs522 per MMBTU.
- August 2026: Petroleum Division notifies the revised August rate of Rs343 per MMBTU, down 76 percent from January.
Aasan alfaaz mein
Hukumat ne factory walon ke gas generators par lagne wala captive levy tax Rs1,406 se ghata kar Rs343 per MMBTU kar diya hai. Yeh kami IMF ke sath naye hisaab par ittefaq ke baad hui hai. Is tax se aam bijli sarfeen ko Re0.90 per unit ka relief milna tha, jo ab levy kam hone ki wajah se bohat had tak khatam ho jaye ga.
