Govt. finalizes plan to transfer captive power levy benefit to DISCOs, KE consumers

ISLAMABAD: The government is all set approve mechanism to pass on financial benefit of Petroleum Levy from Captive Power Plants (CPPs) to the electricity consumers for Discos and K-Electric, Newzshewz learnt reliably
The Parliament has enacted the Off the Grid (Captive Power Plants) Levy Act, 2025, to impose a levy on natural gas based captive power plants to facilitate their respective transition to the Electricity Grid. Section 4 of the Act provides that the concerned Divisions under Rule of Business, 1973 shall calculate the rate of Levy considering the difference of electricity tariff of industrial B-3 category notified by NEPRA and self-power generation cost of the captive power plant at the gas tariff notified by OGRA.
In accordance with the Act, the levy rate shall be set initially at 5 percent fixed margin over and above the power tariff, which shall increase to 10 percent from August 1, 2025, 15 percent from February 1, 2026; 20 percent from August 1, 2026, and it will remain at that level thereafter.
Section 3 of the Act sets out that captive power plants shall pay the determined levy on consumption of natural gas or RLNG, over and above the sale price determined by OGRA. The agents, as defined in the Act, shall be responsible for billing of levy to captive power plants, its collection and onward payment to the Federal Government (Annex-I). Furthermore, Section 5 (1) of the Act also stipulates that “the Levy shall be utilized by the Federal Government for reduction of power generation tariff for all consumer categories of power sector”.
In this backdrop, a mechanism to pass on benefit of the Levy to power sector consumers has been drafted by this Division. The proposed mechanism states that the Petroleum Division will ensure remittance of the collected levy to the Finance Division within two days after the closing of each month. Based on information from the Finance Division and electricity sales data, Power Planning & Monitoring Company (PPMC) will work out the relief to be passed on to the entitled electricity consumers.
PPMC would submit this information to NEPRA with request to allow the same to be passed on to the electricity consumers and accordingly NEPRA will issue the determination each month after necessary due diligence. It is to be noted that, the benefit of the levy collected in a month will be passed on to the electricity consumers with a lag i.e. the benefit of Levy Collected in January will be passed on in the billing month of March based on their consumption in January.
The summary was circulated to the Finance, Commerce, Petroleum, Law & Justice and Industries & Production Divisions, and NEPRA for views and comments. Petroleum Division has supported the proposal and has shared views on the mechanism which are already covered in the proposed mechanism. Ministry of Commerce has proposed that the benefit may only be passed to the industrial consumers only, however, the same is contradictory to the provisions of the Act which provides that the levy shall be utilized to pass the benefit to all categories of consumers. Law Division has endorsed the proposal and stated that no comment is required from legal point of view. NEPRA has also conveyed no objection to the summary and has recommended that mechanics of passing on relief to the consumers may be made part of monthly FCA submitted by CPPA-G which is well noted. Finance Division. Ministry try of Industries and Production have not shared views despite multiple reminders and may share their views during the meeting.
Mechanism to pass on benefit, the Petroleum Division will remit the amount of levy collected within two days after the closing of each month to the Finance Division (For e.g. levy collected in January will be remitted by February2’d) ;(ii) on the same day, the Finance Division will intimate the amount of levy collected to the Power Division and transfer the amount of levy to CPPA-G for onward issuance of credit note / cash disbursement to respective DISCOs and K-Electric based on the working finalized by PPMC;( iv) on such intimation of Finance Division, the Power Division will intimate the PPMC regarding the amount of levy collected during that month;(iv) based on the electricity units sold data provided by the PITC (in case of DISCOs) & K-Electric, PPMC will work outreach month, per unit relief, to be passed on to the entitled electricity consumers. PPMC would submit this information to NEPRA with the request to allow the same to be passed on to the consumers. The following owing formula will be used to determine the per unit rate of benefit of few to be passed on to the electricity consumers.
NEPRA will issue its determination each month after necessary due diligence. The benefit of the levy collected in a month will be passed on to the electricity consumers with a lag of one month. For e.g. the data for January will be completed by February 15, and the benefit of the levy collected in January will be passed on in the bi(ling month of March based on their consumption in January.
In light of the above, approval of the Economic Coordination Committee (ECC) of the Cabinet has been solicited for the following: (i) a passing on relief of collected Off the Grid (Captive Power Plant) Levy for all the consumers of Discos and K-Electric except lifeline consumers as per mechanism; (ii) proposed mechanism to pass on Off the Grid (Captive Power Plant) Levy to the electric power consumers and ;(iii) authorization for Power Division to issue following guidelines to NEPRA under Section 31 of NEPRA Act: (iv) NEPRA shall evaluate the monthly data submitted by PPMC and determine the per unit rate of monthly levy benefit to be passed on to entitled consumers as per approved mechanism ;(v) NEPRA shall issue and notify the above determination on a monthly basis along with the monthly fuel charges adjustment (FCA) determination. Ends