ISLAMABAD : While highlighting significant flaws in the calculation of the Rs. 791/mmBtu levy on Captive Power Plants (CPPs), the Korangi Association of Trade and Industry (KATI) has urged the government to withdraw the existing levy and recalculate it based on NEPRA’s B-3 category tariff.
In a letter to Minister for Petroleum and Natural Resources, Ali Pervaiz Malik, KATI has raised a serious concern regarding the levy of Rs. 791/mmBtu imposed on natural gas consumption by captive power plants, as notified under the Captive Power Plants (Off-Grid) Levy Ordinance, 2025.
The Association has appreciated the Ministry’s intent to ensure cost parity between grid electricity and captive generation, the technical methodology used in calculating the levy contains critical errors that must be rectified immediately.
Based on comprehensive analysis conducted its technical team, KATI has claimed that legal framework misinterpreted, adding that section 4 of the Levy Ordinance explicitly states ; “the rate of levy shall be calculated by taking into account the difference of power tariff of industrial B3 category, notified by NEPRA, and the self-power generation cost of the captive power plant at the gas tariff notified by OGRA.”
This clearly mandates comparison between NEPRA’s B3 tariff and captive generation cost, not the total consumer bill nor any government surcharge.
The Association has further claimed that PHL surcharge has been wrongly included, saying that the Petroleum Division has included the Rs. 3.23/kWh Debt Servicing Surcharge (PHL) in the electricity tariff used for levy comparison. This is legally and technically incorrect.
PHL is not part of NEPRA’s tariff notification. It is a separate government surcharge to recover interest on circular debt and is not defined in the NEPRA Act, the Electricity Act, or the Transmission Rules.
According to the Association correct grid tariff is Rs. 30.80/kWh, not Rs. 40.30/kWh. The calculation should be based on the weighted average of NEPRA’s peak and off-peak rates (Jan 2025): – Peak (4 hrs): Rs. 37.83, – Off-peak (20 hrs): Rs. 29.39, – Weighted average: Rs. 30.80/kWh. This is the correct grid cost for levy parity.
Actual captive cost is Rs. 39.88/kWh – corrected parameters: – Gas price: Rs. 3,500/mmBtu, Gas consumption: 0.285 m³/kWh, fuel cost: Rs. 35.23/kWh, updated O&M: Rs. 4.65/kWh.
Correct Levy is Negative: implied gas price for parity = (30.80 -4.65) / 0.285 = Rs. 2,457/mmBtu, levy 2,457-3,500 = Rs. 1,043/mmBtu. Grid is already more economical than captive power.
Even Hypothetically Including PHL- grid incl. PHL = Rs. 34.03/kWh, implied gas parity price = Rs. 3,644/mmBtu, levy Rs. 144/mmBtu (still much lower than Rs. 791) . PHL adds Rs. 1,133/mmBtu in gas terms-an inappropriate distortion. Natural Grid Migration: – Gas-based captive generation is already costlier. Industries with grid access are shifting voluntarily.
Only two groups remain on captive i.e. those with sensitive machinery and those without grid access (until connectivity arrives), KATI said, recommending that Levy of Rs 791/mmBTU be withdrawn immediately and levy calculation should be on the basis of NEPRA’s B3 tariff and realistic cost. Exemption be granted to those industries which are without grid excess or need technical reliability. Ends
