The manufacturing sector and the power division on Thursday jointly pressed for the removal or reduction of the petroleum levy on furnace oil and diesel used in power plants, saying the tax adds about Rs10 per unit to electricity costs.
The demand was raised at a public hearing of the National Electric Power Regulatory Authority (Nepra), the power-sector regulator, on a request by the Central Power Purchasing Agency (CPPA) for an additional monthly fuel cost adjustment (FCA) of Rs2.56 per unit. CPPA wants distribution companies to recover about Rs33 billion for electricity used in September through November bills. A government official said the proposed adjustment was the highest for comparable months in recent years.
Why industry wants the levy cut
Industrial representatives Amir Shaikh, Arif Bilwani, Tanveer Bari and Rehan Javed, speaking for chambers of commerce and industry, said the government charges substantial petroleum levies — about Rs76,000 per tonne on furnace oil and Rs80 per litre on diesel — which could be reduced to cut generation costs amid the energy squeeze linked to the Iran conflict.
Power division entities confirmed that furnace oil- and diesel-based generation made up 3.6% of total output in September because liquefied natural gas (LNG) and other cheaper fuels were unavailable. Industry speakers said lifting the levies could bring generation costs down from around Rs62 per unit to Rs44–50 per unit, and argued the levy also inflates the government’s subsidy bill by moving money from one pocket to another.
They said the prime minister had earlier removed some charges to support power tariffs, but that relief was later withdrawn. They also called for immediate suspension of the surplus incremental package, which they said adds around Rs11 per unit for grid consumers.
What the power division and CPPA said
Naveed Qaiser, chief financial officer of the Power Planning and Monitoring Company (PPMC), agreed that petroleum levies on diesel and furnace oil heavily affect generation costs. He said the power division has been pressing for their removal or cut at relevant forums and urged business groups to keep raising the issue with senior officials. Cutting tariffs, especially for industry, remains a government priority to improve regional competitiveness, he said, adding that earlier steps had already lowered tariffs by about Rs10 per unit for consumers generally and by up to Rs18 per unit for industry.
CPPA’s Rehan Akhtar said September’s actual fuel cost was Rs10.022 per unit against a reference rate of Rs7.46, hence the Rs2.56 additional FCA request. The total financial impact was put at Rs32.76 billion, mainly from a changed fuel mix and dearer alternative fuels. He maintained the net FCA increase would not exceed Rs1.45 per unit, because October’s existing positive adjustment would expire and be replaced by the proposed Rs2.56 figure in November.
Data disputes and coal costs
Nepra and industry speakers flagged gaps between generation data submitted by CPPA and other records, and sought more transparency. They questioned an earlier Rs16 billion adjustment linked to LNG prices, saying timely reporting could have avoided much of the fresh FCA. Officials from Nepra’s Monitoring and Enforcement Division also queried the consistency of information from government entities. Nepra member Amina Ahmed said the regulator knew of the discrepancies but did not want every inconsistency turned into a public “circus”.
Industry also challenged coal buying at the Port Qasim power plant, alleging purchases through affiliated firms at prices well above those paid by other plants, and asked for a full probe, including by the National Accountability Bureau. Nepra said only prudent coal costs would be allowed and that the producer would have to absorb the rest.
Government entities reported overall power demand up 6.5% in September, with industrial use up 6.7%. Industry said the rise reflected a shift from captive plants to the grid, not the incremental package. Average fuel cost jumped almost 37.5% year-on-year in September as taxed, expensive fuels filled the gap left by scarce LNG and greater use of imported coal.
CPPA data showed high-speed diesel supplied 213 gigawatt-hours (GWh), about 1.6% of grid supply, at Rs62.14 per unit, versus 80 GWh at Rs54 in August. Furnace oil generation was 263 GWh in September, down from 321 GWh in August, at Rs44.86 per unit versus about Rs46 earlier, still close to 2% of total generation.
Timeline: what has happened so far
- August: High-speed diesel generation was 80 GWh at about Rs54 per unit; furnace oil output was 321 GWh.
- September: Actual fuel cost rose to Rs10.022 per unit against a Rs7.46 reference; diesel and furnace oil together were 3.6% of generation; overall demand rose 6.5%.
- October: An existing positive fuel cost adjustment remained in place on bills.
- Thursday (Nepra hearing): CPPA sought Rs2.56 per unit additional FCA for September use; industry and the power division sought petroleum levy relief.
- November (proposed): The Rs2.56 FCA would appear on bills, replacing October’s adjustment, for a net rise of no more than Rs1.45 per unit, according to CPPA.
Aasan alfaaz mein
Bijli ke liye diesel aur furnace oil par jo petroleum levy lagti hai, usay kam karne ka mutalba industry aur power division ne kiya hai. Unhone kaha ke yeh levy bijli mein lagbhag Rs10 per unit zyada bojh daalti hai. CPPA ne September ke liye Rs2.56 per unit extra fuel cost adjustment maanga hai, jo November ke bill mein aa sakta hai. CPPA ke mutabiq net izafa Rs1.45 per unit se zyada nahi hona chahiye, lekin asar aam billon aur industry ke kharche donon par padega.
