IHC blocks captive power levy on Universal Gas Distribution Company, strikes down federal orders

The Islamabad High Court (IHC) has set aside federal measures that sought to bring Universal Gas Distribution Company (Private) Limited (UGDCL) under the Off the Grid (Captive Power Plants) Levy Act, 2025, ruling that the government acted without lawful authority, Business Recorder reported. 

Justice Sardar Muhammad Sarfraz Dogar allowed two constitutional petitions filed by UGDCL and declared the January 9 notification appointing the company as a levy collection agent unlawful to the extent it applied to UGDCL.

The court also struck down the Off the Grid (Captive Power Plants) Removal of Difficulties Order, 2026, issued on February 24, and quashed a March 11 letter from the Ministry of Energy (Petroleum Division) seeking pricing and gas supply data for levy calculation.

The detailed judgment was issued on July 13 after the court reserved its decision on June 30.

UGDCL is a private company licensed by the Oil and Gas Regulatory Authority (Ogra) to supply indigenous gas to industrial consumers, including captive power plants. Its gas prices are negotiated privately and are not notified by Ogra.

The court held that the Levy Act linked the imposition and calculation of the levy to gas sale prices notified by Ogra. Since UGDCL’s prices were not notified by the regulator, the company did not fall within the charging mechanism approved by Parliament.

The federal government had argued that UGDCL was only a collection agent and therefore lacked legal standing to challenge the measures.

The court rejected that position, observing that the notification required the company to bill, collect and deposit the levy, exposed it to legal consequences for non-compliance and required disclosure of confidential commercial information.

It held that these obligations directly affected UGDCL’s legal rights and commercial interests, making it an aggrieved party entitled to seek relief under Article 199 of the Constitution.

The judgment said the executive could not expand the scope of a fiscal law through subordinate legislation or notifications.

The court made no order as to costs.