The captive levy on gas is revised downward — thanks to Petroleum Minister Ali Pervaiz Malik

Some reforms are announced. Others are negotiated. A rare few are simply delivered — quietly, decisively, and against odds that most policymakers prefer not to engage. The downward revision of Pakistan's captive gas levy belongs firmly to that third category. And the credit for it belongs, unambiguously, to one man: Petroleum Minister Ali Pervaiz Malik.

Until this month, the Captive Power Plant levy stood at Rs1,303 per mmBtu, anchored to the peak B3 industrial electricity tariff under a methodology that had ceased to function as a price signal. In practice, it had become a structural penalty on industrial gas consumption — pricing efficient plants out of operation, hollowing out gas demand, and pushing Sui company losses past Rs104 billion in the first half of the fiscal year alone.

Following Malik's formal proposal during the IMF's third review, the methodology has been recalibrated to a weighted average of peak and off-peak B3 rates. The revised levy now stands at approximately Rs522 per mmBtu — a near 60 per cent reduction in a single move, with relief expected to hold across cycles in the 30 to 60 per cent range.

This was not a minor concession. It was the dismantling of a policy instrument that had outlived its original logic.

What it means for gas production companies and gas utility companies

For Pakistan's gas exploration and production sector, the previous levy was actively lengthening the circular debt cycle. Industrial demand was being driven off the gas network, indigenous production was losing its paying offtaker, RLNG was being diverted to subsidised consumption, and Sui losses were aging into receivables on E&P balance sheets.

Aged receivables become deferred development. Deferred development becomes lost reserves and lost national output. Circular debt, in our industry, is the line between drilling next year's well and walking away from it. For the gas utility companies, the same distortion was equally corrosive: by suppressing high-load industrial offtake, it reduced throughput and system utilisation, worsened revenue recovery, and accelerated the accumulation of unpaid receivables and payables across the chain.

It also incentivised inefficient allocation decisions, including RLNG diversion to subsidised segments, thereby heightening the financing gap that ultimately surfaces as circular debt. The recalibrated levy begins to repair that architecture by re-anchoring demand on the network, improving the utilities' cash-flow dynamics, and restoring a more sustainable basis for procurement, dispatch, and settlement.

What it means for industrial consumers

For more than two years, captive consumers — particularly in textiles, the country's largest export sector — had been operating at gas prices that priced them out of regional markets. Indian, Bangladeshi, and Chinese competitors were accessing gas at $6–9 per mmBtu, while Pakistani exporters faced effective costs well above that. Captive offtake fell sharply, RLNG surpluses grew, and an $18 billion textile export base came under sustained pressure.

It is therefore unsurprising — and entirely deserved — that the All Pakistan Textile Mills Association (APTMA) has publicly issued a thank-you note acknowledging the Petroleum Ministry's efforts, and that the Pakistan Textile Council has expressed its appreciation. When industry bodies that have spent a year writing critical letters shift, in unison, to acknowledgement, the reform has earned that response on its merits.

Leadership measured in outcomes

The petroleum minister could have lobbied for headlines. He chose technical engagement. He raised the proposal at the third review with documented evidence; the IMF deferred. He returned with sharper data, pressed the case, and converted a deferral into approval — while accepting candidly the conditions attached. That intellectual honesty is what gave the proposal its credibility at the negotiating table.

In appreciation

On behalf of PEPPCA, Pakistan's gas exploration and production companies, we extend our genuine and considered appreciation to the Honourable Petroleum Minister Ali Pervaiz Malik. His advocacy was patient where it needed to be patient, decisive where decisiveness was required, and unfailingly grounded in evidence.

Reform of this scale is never a solo achievement, and the professional teams at the Petroleum Division, the Finance Division, and the regulators deserve recognition for the technical groundwork that supported the case. But it does require an anchor — someone willing to absorb the difficulty and hold the line. Malik has been that anchor.

The gas production industry and industrial consumers have duly taken note of this decision. The decision represents a balanced, win–win outcome for all stakeholders by enabling E&P companies to optimise gas production through the restoration and expansion of demand from a segment with the demonstrated capacity and willingness to afford the supply.

This, in turn, supports improved cash-flow discipline across the value chain, contributes to the containment of circular debt, and reduces the fiscal and tariff distortions associated with cross-subsidisation. By strengthening the sustainability of the gas market, the decision is expected to support broader industrial activity, protect employment, and generate the consequential economy-wide benefits that follow. PEPPCA records its appreciation and stands ready to support the work that follows.

The author is Secretary General of the Pakistan Petroleum Exploration and Production Companies Association (PPEPCA).