Pakistan increases gas levy on captive power plants

The government has increased the gas levy on captive power plants by 13 percent, which will raise production costs for industries, while planning to provide relief to electricity consumers.

According to sources, the levy on gas has been raised by Rs163 per MMBTU, increasing the total rate from Rs1,243 to Rs1,406 per MMBTU. This increase has been implemented under the Off-the-Grid Captive Power Plants Levy Act 2025.

Officials said that the revenue collected from this levy will be used to provide relief to electricity consumers. A system is being prepared under which this amount will be passed on to consumers with a delay of about two months.

Earlier, the federal cabinet had approved this plan to use the levy on captive power plants to reduce electricity costs. The government also shared this framework with the International Monetary Fund (IMF) as part of wider energy sector reforms.

The Captive Power Plants Levy Act was introduced in June 2025 to discourage inefficient private power generation and encourage industries to shift to the national grid.

After the latest increase, the total gas price for captive power plants has gone up from Rs4,743 to Rs4,906 per MMBTU. The government had already revised tariffs for these users from February 1, 2025.

This step is part of ongoing efforts to balance energy prices, but it is likely to increase operational costs for industries that depend on captive power generation.