The International Monetary Fund (IMF) has revised the calculation method for the “off-the-grid” levy imposed on gas used by captive power plants in Pakistan, marking a key adjustment under the country’s ongoing energy reform programme.
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According to officials, the revised framework changes the reference point for levy calculation from peak-hour electricity tariffs to the average of peak and non-peak rates of the B3 industrial tariff. This adjustment is expected to significantly reduce the financial burden on industrial users, particularly export-oriented sectors.
Pakistan gets IMF nod to cut captive gas levy by up to 60%, reducing costs for industrial consumers.
The move offers relief but keeps pressure on industries to shift to grid electricity.
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The new mechanism is projected to cut the levy by around 61 percent, bringing it down from approximately Rs1,303 per MMBtu to nearly Rs500 per MMBtu. The government has already issued a formal notification to implement the revised formula.
Previously, industries operating captive power plants were paying substantially higher costs due to a combination of base gas prices and the additional levy, which had pushed total expenses well above international LNG prices. This sharp increase had led many industries to reduce or discontinue gas-based power generation.
Official data shows a significant decline in gas consumption by the industrial sector, with usage dropping sharply in both export-oriented industries and regional distribution networks as firms shifted away from captive generation due to rising costs.
The Petroleum Division had presented the case for revision to the IMF, arguing that the earlier formula was placing excessive pressure on exporters. While the IMF rejected requests to freeze or delay planned future increases in the levy, it agreed to modify the pricing mechanism.
Industry representatives have welcomed the decision, saying it will help improve competitiveness and ease energy costs at a time when exporters are already facing global economic pressures.
At the same time, energy officials noted that the policy continues to encourage a shift from gas-based captive power generation towards electricity from the national grid, in line with broader reform goals.
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Despite the revision, the levy remains part of Pakistan’s structural energy reform commitments under IMF-backed programmes aimed at improving efficiency and restructuring the power sector.