ISLAMABAD: The government is likely to increase 5 per cent penalty over power grid tariff to 20 per cent in 18 months on the insistence of International Monetary Fund (IMF), sources told Newzshewz.
On January 30, 2025, Petroleum Division apprised the cabinet that under the Memorandum of Economic and Financial Policies (lv{EFP) and stand By Agreement (SBA) with the International Monetary Fund (IMF), the Government had agreed for a complete phasing out of the gas/RLNG-based Captive Power Plants (CPPs) by end January 2025 for their transition to the power grid with the objective to increase the demand for electricity, utilization of excess / unused capacity and avoidance of pressure on power sector liquidity. It was also agreed to increase the indigenous gas tariff for captive power plants equivalent to RLNG.
It was informed that during the 6rst review of SBA in January, 2024, the Petroleum Division submitted its apprehension that captive power units were I gal industrial units / undertakings which could not be forcibly shutdown for their transition to power grid, and instead the price action / gradual tariff revision could pave a way for their transition. Petroleum Division had at various forums highlighted the practical difficulties in the implementation of the decision to completely shut down the captive power plants, not least of which was the utilization of the imported RLNG at full cost. The Petroleum Division while following its stated strategy rad revised the gas tariff for captive power plants from Rs. 1,100 mmbtu to Rs. 3,000/mmbtu through three successive gas price revisions, which happened, in November, 2023, February, 2024 and July, 2024.
It was further informed that the matter of complete closure of captive power plants and its implications at large on the gas sector were presented to the IMF during review meetings as well as to the Prime Minister and also discussed in various Inter-Ministerial meetings. As a result, the Finance Division took up the matter with the IMF, which agreed to review the Structural Benchmark for closure of captive power plants by end-January, 2025. Subsequently, the IMF suggested an alternate proposal which was seeking to equate the existing gas tariff for captive power plants to RLNG equivalent in rupee terms, followed by imposition of levy which would be calculated as the difference of power generation cost of captive plant on gas/RLNG and power tariff of B3 industrial category. The IMF also suggested imposition of a penalty of 5 % over power grid parity tariff, which would increase to a maximum of 20% in 18 months.
It was further informed that Petroleum Division as a first step had revised the existing tariff of Rs. 3,000/mmbtu to Rs. 3,500/mmbtu with the approval oi the Federal Government which would take effect from February 01, 2025. For the imposition of levy, a draft off the grid (Captive Power Plants) Levy Ordinance 2025, had been drafted with the assistance of Law and Justice Division.
The Cabinet was apprised that since the IMF had revised the original Structural Benchmark seeking to shut down gas supplies to captive power plants, therefore, it was imperative to proceed with the imposition of the levy on CPPs.
Similarly, Article 89 of the Constitution of Pakistan, 1973 provided that the President may, except when the Senate or the National Assembly was in session, if satisfied that circumstances exist which render it necessary to take immediate action, make end promulgate an Ordinance as the circumstances may require.
Foregoing in view, the Petroleum Division solicited following approvals from the Federal Cabinet: (i) approval of the draft “Off the Grid (Captive Power Plants) Levy Ordinance, 2025” in terms of rule 16(1)(a) of the Rules of Business, 1973; (ii) approval for the promulgation of the draft “Off the Grid (Captive Power Plants) levy Ordinance, 2025” in terms of rule 30(1) of the Rules of Business, 1913; (iii) and exemption of referring the Draft Ordinance for consideration / recommendation of the CCLC.
It was informed that owing to the approaching deadline for the revised Structural Benchmark of January 31, 2025, the summary could not be circulated to Finance Division, Power Division, Law Division and Commerce Division for their views/ comments.
In the ensuing discussion, the Prime Minister expressed serious concern on the delay in the submission of the summary just one day before the deadline of January 31, 2025. He emphasised that it should have been prepared much earlier because IMF talks were held in September 2024, The Petroleum Division apprised that intensive discussions had taken place on the issue and the IMF had kept asking for more changes, and had finally given the two options. It was also informed that it was on the basis of a decision of the Cabinet taken in 2021 to stop gas supplies to captive power plants on the basis of which the IMF had insisted on the original structural Benchmark.
Ends
