The federal government has officially presented its plan to the International Monetary Fund (IMF) for reducing electricity prices using revenue from a newly introduced Captive Power Levy. According to estimates, the first phase will lower electricity rates by Rs0.90 per unit, offering relief amid inflation and rising utility costs.
Initially, a 5% levy has been imposed on gas-based captive power plants, which will increase gradually to 20% by August 2026. The government aims to use this additional revenue to subsidize electricity tariffs across all consumer categories, including households and industries.
The plan comes as part of broader fiscal adjustments under the IMF programme. The levy ordinance has been issued, and its implementation started immediately. Authorities hope this measure will also push inefficient captive plants to transition to the national grid, enhancing energy efficiency.
In case of non-payment, the government will take strict action, including cutting off gas supply to defaulting plants. This enforcement mechanism ensures compliance and secures funding to support tariff relief without increasing circular debt.
Earlier, in February 2025, the government had already hiked the gas tariff for captive plants from Rs3,000 to Rs3,500 per mmBtu. The Captive Power Levy, introduced after this hike, strengthens the government’s commitment to energy sector reforms and improving fiscal sustainability.