By SKM
June 10, 2026
ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has urged the Petroleum Division to review the methodology used to calculate the levy on gas supplied to industrial captive power plants (CPPs), saying the formula is based on incorrect assumptions, outdated benchmarks and cost components that do not reflect notified tariffs or actual industrial operating conditions.
In a letter to Petroleum Secretary Hamed Yaqoob Sheikh, APTMA appreciated the government’s decision to replace the Industrial B3 peak electricity tariff with a weighted average of peak and off-peak tariffs in the levy calculation. However, it said several key issues remain unresolved and continue to distort the levy imposed on captive power users.
APTMA said its main demand is that the government revise the remaining parameters of the formula so only notified and comparable cost elements are included. It argued that the levy was intended to equalise the cost of captive generation with grid electricity, but the current method is increasing costs for industries that have invested in captive power.
A major concern is the use of an off-peak benchmark tariff of Rs28.11 per unit instead of the notified Industrial B3 off-peak tariff of Rs23.67 per unit under SRO 279(I)/2026. APTMA said the difference comes from adding an MDI-based fixed charge of Rs4.44 per unit.
The association said the fixed charge is linked to individual consumer demand, sanctioned load and Maximum Demand Indicator (MDI), and cannot be converted into a uniform per-unit charge for all consumers.
APTMA also questioned the assumption used to derive the Rs4.44 per unit figure, saying it appears based on a 30 percent load factor, which does not reflect actual industrial usage. It said textile mills operating captive co-generation plants typically run at 80 to 90 percent load factor, which would reduce the fixed charge to Rs1.50–Rs1.70 per unit. It added that even the government’s incremental power package uses a 60 percent benchmark load factor, equal to about Rs2.28 per unit.
On gas pricing, APTMA said the levy calculation assumes Rs3,500 per MMBtu, while captive plants connected to SNGPL are actually receiving a blended rate of Rs4,424.57 per MMBtu, based on 75 percent RLNG at Rs4,732.76 and 25 percent system gas at Rs3,500.
It said applying the actual gas price in the same methodology results in a negative levy of Rs603 per MMBtu for March 2026.
APTMA also disputed the O&M cost assumption of Rs1.65 per unit, saying it is based on an eight-year-old NEPRA determination. It estimated current O&M costs at around Rs5.58 per unit.
The association objected to the inclusion of the Debt Servicing Surcharge (DSS) of Rs3.23 per unit in the benchmark electricity tariff, saying it is not part of the NEPRA-notified tariff. It also questioned the application of the statutory margin on the benchmark tariff.
APTMA said correcting any one of the disputed assumptions results in a negative levy, while correcting all three key issues produces a negative levy of about Rs810 per MMBtu.
The association said the findings show that captive power generation is already more expensive than grid electricity under current fuel prices and cost structures, and therefore does not provide the cost advantage assumed in the levy design.
APTMA has urged the Petroleum Division to undertake a comprehensive review of the levy formula and ensure future calculations are based on actual fuel prices, current operating costs, notified tariffs and legally valid assumptions. Ends
