By SKM
February 17, 2027
ISLAMABAD: The government is set to raise with the International Monetary Fund (IMF) mission, arriving on February 25, the controversial off-the-grid levy on captive power plants, which has caused significant financial and operational setbacks for Pakistan’s gas and export sectors. Authorities are seeking an end to the levy, which has largely backfired, the Petroleum Division sources told Exclusivewaves.com.pk.
“The levy was enforced under IMF diktat to encourage the export sector to rely more on grid electricity. However, while industrial consumption of grid electricity did increase, it remained below expectations due to inconsistent supply and technical interruptions—particularly in Karachi, where sufficient grid electricity was unavailable.”
The levy, initially set at 5% in February 2025, increased to 10% in July 2025. It is slated to rise further to 15% from February 2026 and 20% in August 2026. Every month, levy is notified since February 2025.
According to the December 2025 notification, the off-the-grid levy has surged to Rs1,248 per MMBtu, up from Rs850 in November 2025. The increase is primarily attributed to positive FCA and QTA adjustments, as well as the cumulative impact of raising the levy to 10% effective from July 2025. As a result, the effective gas cost for captive power plants has jumped to Rs4,748 per MMBtu, and with the addition of 18% GST, it now stands at Rs5,600 per MMBtu.
“Previously, the top officials of the Petroleum Division, led by Petroleum Minister Ali Pervaiz Malik, had raised the same issue with the IMF. However, the IMF officials only listened and did not provide any response. Now, the authorities are gearing up to address the matter with the upcoming IMF mission.”
The export sector’s gas consumption has alarmingly plummeted. In Sui Northern’s jurisdiction, usage fell from 180mmcfd to 32mmcfd, while in Sui Southern, it declined from 220mmcfd to 100mmcfd. Overall, export sector consumption dropped from 380mmcfd to just 132mmcfd. This sharp decline has forced authorities to go for diverting two LNG cargoes per month from Qatar to international markets due to reduced domestic demand. In addition one more cargo of Pakistan LNG Limited (PLL) is also being diverted to international market every month.
Meanwhile, Lahore High Court (LHC) on last Friday annulled the levy, ordering SNGPL to refund the Rs11 billion collected from captive power plants. The court also declared that the government’s assumption of 36% efficiency for levy calculations was invalid and directed independent audits of captive power units installed by industry.
Petroleum Division officials are expected to present these developments to the IMF, stressing that the levy is legally unsustainable and economically counterproductive. They will highlight the massive revenue shortfall, the steep drop in export sector gas usage, and the Rs100 billion loss to SNGPL and SSGC. Officials maintain that continuing the levy in light of the court ruling is impractical and could further damage industrial operations.
The government aims to resolve the off-the-grid levy issue with the IMF, safeguard stability in the gas sector, and protect industrial and export activities while ensuring proper revenue collection. Ends
