Textile Council asks PM to seek IMF nod to drop off-grid captive power levy, reclassify cogeneration units

Pakistan Textile Council has asked Prime Minister Shehbaz Sharif to raise with the International Monetary Fund a proposal to treat industrial cogeneration captive power units as industrial gas connections and to withdraw the Off-Grid (Captive Power Plants) Levy.

In a letter to the prime minister, the Council’s chairman said that with Pakistan in talks with the IMF mission, the off-grid levy should be assessed against measurable economic outcomes and whether it preserves integrity of gas pricing.

The Council said the levy regime over the past year has altered price signals for industry while failing to produce structural gains in gas or power markets. It said the debate has shifted from the levy rate to the way commodity prices are being built and what signals are being sent to export-oriented production.

PTC said the effective tariff for externally competitive captive industrial users has climbed to almost $17 per MMBtu even though the underlying cost of indigenous gas is below $4 per MMBtu. It said the difference of around $13 per MMBtu, about Rs 3,700 per MMBtu, reflects cross-subsidies, LNG portfolio adjustments and the off-grid levy rather than upstream costs.

It cited OGRA’s prescribed SNGPL price, including revenue requirements and wellhead cost, at around Rs 1,330 per MMBtu on a cost-of-service basis. After removal of RLNG ring-fencing and inclusion of about 24 LNG cargoes in the FY2025-26 price build-up, PTC said the prescribed level rose to roughly Rs 1,895 per MMBtu, while the notified price stood near Rs 1,804 per MMBtu after adjustments and cargo diversions.

The Council said captive users were already paying around Rs 3,500 per MMBtu before the levy, compared with a blended system cost of about Rs 1,804 per MMBtu, which it said represented an estimated cross-subsidy burden of about Rs 140 billion. It said the additional levy of Rs 1,243 per MMBtu imposed in December 2025 has added to the cost.

In its assessment, PTC said industrial captive consumers are absorbing multiple cost layers, including surplus LNG portfolio costs linked to power-sector demand patterns, an estimated Rs 1,700 per MMBtu cross-subsidy for piped residential consumers, and the off-grid levy.

PTC argued that efficient cogeneration units operating on industrial premises typically achieve 70% to 90% energy utilisation and face minimal transmission and distribution losses. It said these systems should not be treated the same as conventional captive generation for levy purposes because it weakens incentives for efficiency and complicates investment planning.

The Council said the IMF engagement provides an opening to show that the levy mechanism has reduced industrial demand, increased uncertainty for gas contracting and shifted sector inefficiencies into commodity prices.

It proposed two steps: a certification protocol to reclassify verified high-efficiency cogeneration units as industrial gas connections using measurable energy-utilisation benchmarks, and withdrawal of the Off-Grid (Captive Power Plants) Levy so pricing returns to a regulator-led, cost-based framework.

PTC said export industries remain a key source of foreign exchange and macroeconomic stability, and warned that embedding cross-sector costs into gas tariffs reduces competitiveness when external resilience is critical. It said it supports fiscal discipline but wants pricing structures that reflect costs and reward efficiency.