Pakistan has secured conditional approval from the International Monetary Fund to revise the formula for calculating the captive gas levy, a move that could lower gas costs for industrial consumers using captive power plants for in-house electricity generation.
According to a media report, the revised mechanism would replace the current reference point based on the peak B3 industrial electricity tariff with a weighted average of peak and off-peak B3 rates. The change could significantly reduce the levy burden on industrial users, with estimates suggesting a possible cut of up to 60% for March.
Under the existing pricing formula, the captive levy stands at Rs. 1,303 per mmBtu. With the proposed weighted-average method, that figure could drop to around Rs. 522 per mmBtu. While the full 60% reduction may not apply every month, past trends indicate industrial users could see levy relief ranging from 30% to 60%.
The formula revision was reportedly sought by Petroleum Minister Ali Pervaiz Malik during Pakistan’s third review talks with the IMF last month. At the time, the Fund had said it would examine the feasibility of using average tariffs but had not made a final decision.
Despite the relief, the IMF has maintained its broader policy stance of discouraging gas-based captive power generation. It has rejected Pakistan’s request to freeze the additional 15% levy and to exempt efficient captive plants from the charge.
Instead, the Fund has asked the government to move ahead with increasing the levy to 20%, saying a higher rate is still necessary to keep industrial users from shifting away from the national grid.
The report said the IMF has also linked the revised formula to electricity demand from the grid. If industrial offtake from the national system declines, the government may be required to impose the 20% levy before the planned August deadline, possibly as early as July. In the event of a sharper fall in grid demand, the levy could be raised beyond 20%.
The captive levy is calculated by measuring the difference between the Nepra-notified B3 industrial power tariff and the cost of self-generation using gas tariffs notified by Ogra. The policy is aimed at making captive generation less attractive and pushing industries toward grid electricity, despite longstanding complaints that grid power remains too expensive.
Government officials have argued that the levy has also hurt gas utilities. They told the IMF that the policy had contributed to losses at Sui companies, partly because imported gas was diverted to lower-end consumers. During the first half of the current fiscal year, the Sui firms reportedly posted losses of Rs. 104 billion, while collections from the captive power levy remained below estimates.
Industries have increasingly turned to alternatives such as rooftop solar to escape high electricity costs, creating fresh concern among policymakers. The IMF reportedly sees the captive levy as a punitive tool meant to discourage inefficient in-house gas-based generation.
At the same time, the shift from captive plants to the national grid has increased costs for industrial users, particularly export-oriented sectors already under pressure.
The report added that the IMF wants to ensure industries that have already moved to grid electricity do not switch back to gas-based captive power once the revised levy formula takes effect.
