ISLAMABAD, April 29 — International Monetary Fund has granted Pakistan conditional approval to revise the captive gas levy formula, a move that could reduce gas costs for industrial consumers and ease pressure on production sectors.
The proposed change, requested by Petroleum Minister Ali Pervaiz Malik during review talks, replaces the existing calculation based on peak B3 industrial electricity tariffs with a weighted average of peak and off-peak rates. Officials say the revised formula could lower the levy on captive power plants by 30 to 60 percent, depending on monthly variations.
Currently, the levy stands at over Rs1,300 per mmBtu, but under the new mechanism it could fall significantly, offering partial relief to industries relying on gas for in-house electricity generation.
Conditions linked to electricity demand
The IMF approval comes with conditions aimed at maintaining electricity demand from the national grid. Officials said the levy reduction will remain tied to industrial consumption of grid power, and any significant drop in demand could trigger a reversal of the relief.
In such a scenario, the government may be required to increase the levy to 20 percent earlier than planned, with the possibility of further increases if grid usage declines sharply.
The IMF has also rejected proposals to freeze the additional levy or exempt efficient captive plants, maintaining its policy objective of discouraging gas-based self-generation.
Policy shift toward grid electricity
The captive gas levy is designed to reduce the cost advantage of self-generation by linking gas prices to electricity tariffs notified by regulators. The broader aim is to encourage industries to shift back to the national power grid.
Officials said the revised pricing mechanism reflects a balance between providing short-term relief to industries and continuing long-term energy sector reforms.
Financial and sectoral impact
Government data shows the levy is also a source of revenue, with a target of over Rs100 billion set for the current fiscal year. However, collections have remained below expectations, while gas utilities have faced financial losses.
At the same time, rising electricity costs have led many industries to explore alternatives such as solar energy, adding complexity to the country’s evolving energy mix.
Also read: Pakistan tells IMF it will pass fuel price increases to consumers as inflation pressures build
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