President approves “Off the Grid Levy Bill” to impose new tax on captive power plants

The President of Pakistan has approved the “Off the Grid (Captive Power Plants) Levy Bill, 2025,” which was passed by both Houses of Parliament. The bill introduces a levy on captive power plants, aimed at addressing energy costs and reducing consumer power tariffs, BR reported. 

Presented by Federal Minister for Petroleum Ali Pervaiz Malik, the bill outlines that the levy on captive power plants will initially increase by 5% and rise incrementally to 10% by July 2025, 15% by February 2026, and 20% by August 2026.

The bill details the imposition and collection of the levy on the consumption of natural gas or RLNG by captive power plants. The levy will be calculated based on the difference between the industrial power tariff and the self-power generation cost of captive plants. The federal government will use the funds collected to reduce power generation tariffs for all consumer categories. 

Additionally, an annual report on the utilization of the levy will be presented to the National Assembly.

The bill also sets strict penalties for non-payment, with provisions for gas supply termination in case of persistent default. Captive power plants will also be allowed to claim the levy as an expenditure under the Income Tax Ordinance, 2001.

The National Assembly Standing Committee on Petroleum and Natural Resources recommended the inclusion of a transitional plan for industries affected by the levy and emphasised the need for consultations with stakeholders to ensure a smooth implementation process. The committee also discussed K-Electric’s role in gas diversion and its impact on the industry.

The committee further proposed that captive power plants should not be denied access to natural gas but instead be charged higher rates. The Power Division is expected to present detailed plans on these matters in future meetings.