ISLAMABAD: In a significant policy change as part of Pakistan’s energy reform agenda, the International Monetary Fund (IMF) has modified the method used to calculate the “off-the-grid” levy on gas consumed by captive power plants (CPPs), providing notable relief to export-focused industries, it was reported on Thursday.
Under the revised framework, the levy will now be calculated on the average of peak and non-peak hours of the B3 industrial electricity tariff, replacing the earlier peak-only reference.
This adjustment is expected to reduce the levy by around 61 per cent, bringing it down from approximately Rs1,303 per MMBtu to nearly Rs500 per MMBtu. The government has formally notified the revised mechanism.
Previously, industrial users operating captive power plants were paying nearly Rs4,800 per MMBtu, which included a base gas price of about Rs3,500 per MMBtu plus an off-the-grid levy of Rs1,300 per MMBtu. This pushed costs above the prevailing international LNG spot prices, currently around $16.48 per MMBtu, forcing a sharp reduction in gas usage by export industries.
Official data shows a steep decline in consumption, with gas use in the export sector falling to 26 MMCFD from 180 MMCFD, while in Sindh it dropped to 100 MMCFD from 220 MMCFD, as industries increasingly curtailed reliance on captive gas generation due to the rising costs.
The Petroleum Division, led by Federal Minister Ali Pervaiz Malik, presented the case to the IMF, arguing for relief in the levy structure.
While the IMF rejected Pakistan’s request to freeze the levy at 15% and opposed delaying its planned increase to 20% in August 2026, it agreed to modify the calculation method based on average tariff rates instead of peak-hour pricing.
The move has been strongly welcomed by industry representatives.
APTMA Chairman Kamran Khurshid appreciated the decision, praising the efforts of Federal Minister Ali Pervaiz Malik and Petroleum Division Secretary Hamed Yaqoob Shaikh for securing what he described as a meaningful relief for the export sector. He said the revised formula would help reduce energy costs and improve industrial competitiveness at a critical time for exporters facing global price pressures.
Officials noted that the levy has steadily increased since its introduction — starting at 5% in February 2025, rising to 10% in June 2025, then to 15% in February 2026, with a further increase to 20% scheduled for August 2026. The IMF-backed policy aims to discourage gas-based captive power generation and shift industries toward grid electricity consumption.
Energy authorities also reported that the policy has already increased reliance on the national grid, with industrial electricity consumption reportedly rising by around 300 MW, though some officials have questioned the accuracy of these figures, citing inconsistencies in broader consumption data.
Meanwhile, state-owned gas utilities SNGPL and SSGC have reportedly accumulated losses of around Rs120 billion since the levy’s introduction, reflecting the financial strain created by shifting industrial demand patterns.
Officials stressed that despite the revision, the levy remains a core part of Pakistan’s legally backed energy reform agenda under IMF commitments, aimed at restructuring energy pricing and reducing inefficient gas usage. However, they acknowledged that the latest adjustment provides critical short-term relief for exporters struggling with high energy input costs while the transition toward grid-based electricity continues.
