By SKM
March 27, 2025
ISLAMABAD: The stay order by the Islamabad High Court against the levy on gas for captive power plants has neutralized for the time being the reduction in average power tariff by Re1 per unit to be funded by the said levy after getting IMF nod.
The IMF earlier allowed the government to reduce electricity tariff by Re 1 per unit to be financed with the amount of Rs100 billion to be collected through off-the-grid levy imposed on gas for captive power plants, a senior official of the power division told Exclusivewaves.com.pk.
It was the latest suggestion approved by the IMF as part of the government’s endeavor to reduce the overall power tariff across the country by Rs7-8 per unit. It has also been learnt that the federal cabinet in its latest meeting also accorded approval to the reduction of Rs1.50 per unit because of the petroleum levy that has been increased by Rs10 on petrol and diesel.
The government had earlier planned to announce a reduction of power tariff by Rs8 per unit on March 23—Pakistan Day, but it has been delayed because of ongoing talks with IMF on the subject and it is now to be announced sometime in April but it will be effective from April 1, 2025.
However, out of Rs8 per unit, Rs4.73 per unit reduction in tariff will continue on a permanent basis as a result of scrapping agreements with six IPPs, revising power purchase agreements (PPAs) of 16 IPPs on take and pay mode, delinking bagasse power plants from US dollar and lining them with Pak rupee and scaling down the RoE (Return and Equity) of government power plants (GPPs) to 13 per cent based on Pak rupee and fixing the value of US dollar at Rs168.
Experts also say that peak hour tariff needs to be abolished as it was introduced when there was an electricity shortage. Now eletricty is in surplus and the tariff should be based on off-peak rates. “This will also help reduce the power tariff.”
Earlier the government imposed the 5 percent off-the-grid levy (Rs791 per MMBTU) on the newly notified rate of Rs3500 per MMBtu of RLNG or natural gas for captive power plants (CPPs) set up by the export and non-export industry across the country, increasing the gas price to Rs4291 ($15.38) per MMBTU. Textile industry in its letter to Prime Minister questioned the levy’s calculation of Rs971 per MMBTU on CPPs saying it is totally incorrect. It argued that even according to the ordinance, the levy comes to negative Rs556.31 per MMBtu.
The government earlier issued the notification according to which the rate of the levy shall be increased by five percent immediately and further increased to 10 percent by July 2025, 15 percent by February 2026, and 20 percent by August 2026.
However, the Islamabad High Court (IHC) has suspended the notification imposing a levy under Section 3(1) of the Off the Grid (Captive Power Plants) Levy Ordinance, 2025, on the consumption of natural gas or RLNG by captive power plants until April 30, 2025.
A single bench of Justice Khadim Hussain Soomro, who heard the case, after considering the arguments of the petitioners’ counsel, noted that the submissions made are worth consideration and issued notices to the respondents for April 30, 2025. The exception sought has been allowed, subject to all just and legal exceptions.
The petitioners —- Engro Polymer & Chemicals Limited, Gul Ahmed Textile Mills Limited, Alkaram Textile Mills Limited, Platiflex Films private limited, and Lotte Chemical Pakistan Limited are a limited liability company engaged in diverse business activities, including electricity generation from natural gas or LNG through their captive power plants, which are used for their consumption or to supply surplus power to third parties.
The petitioners, through senior counsel Makhdoom Ali Khan, have challenged the notification of March 7, 2025, issued by the Secretary of the Ministry of Energy (Petroleum Division) under Section 3(1) of the Off the Grid (Captive Power Plants) Levy Ordinance, 2025, which imposed a levy on the consumption of natural gas or RLNG by captive power plants. They have requested the Court to declare the 2025 Ordinance unconstitutional and prohibit the respondents from taking any adverse or coercive actions for collecting and/or recovering the levy.
The Secretary of the Petroleum Division, the DG of the Oil and Gas Regulatory Authority (OGRA), the CEOs of Sui Southern Gas Company Limited, Sui Northern Gas Pipelines Limited, and the Punjab Industrial Estate Development and Management Company have been cited as respondents in the case.
The counsel also argued that the levy of tax for the purpose of the Federation is not permissible except by or under the authority of an Act of “Majlis-e-Shura.” In support of his contention, he relied on Engineer Iqbal Zafar Jhagra and another vs. Federation and Others [2013 SCMR 1337], and Cyanamid Pakistan Ltd. vs. Collector of Customs (PLD 2005 SC 495), wherein it has also been held that such legislative powers cannot be delegated to the Executive Authorities. Further reliance was placed on the cases of Government of Pakistan v. Muhammad Ashraf (PLD 1993 SC 176) and All Pakistan Textile Mills Association v. Province of Sindh (2004 YLR 192).
Makhdoom also argued that the fundamental rights, as enshrined in Articles 3, 4, and 9 of the Constitution, have been infringed, and that Article 77 provides that no tax shall be levied for the purpose of the Federation except by or under an Act of Parliament. In this case, Parliament has not passed any Act regarding this matter. Ends
