Fertiliser CPPs hit as govt extends gas levy

Govt targets Rs105b from off-grid captive power plants levy for FY2025-26

ISLAMABAD:

The gas exploration companies and utilities are facing a setback after the government imposed a levy on captive power plants (CPPs) operated by the fertiliser industry.

Industries including textile and fertiliser have long consumed natural gas to run CPPs for generating electricity for their own use.

As part of an International Monetary Fund-backed reform programme, the government introduced the Off the Grid (Captive Power Plants) Levy Act, 2025, empowering the federal government to impose a levy on natural gas-based CPPs.

Earlier, the levy had been imposed on gas supplied by third parties to CPPs and was also applied to CPPs operated by the textile industry.

Sources said the government has imposed the levy on fertiliser plants using domestic gas or liquefied natural gas (LNG) to operate captive power plants to meet their electricity requirements.

At present, Mari Energies has allocated around 200 million cubic feet per day (mmcfd) of gas for the fertiliser sector, while exploration companies have also allocated low-pressure gas for fertiliser units. Sources said the imposition of the levy would discourage the use of gas for captive power generation in the fertiliser industry.

According to an official memorandum issued by the Petroleum Division in response to a query, Section 2(c) of the Act defines a 'captive power plant' as an industrial undertaking or unit engaged in power production, with or without cogeneration, for self-consumption or for sale of surplus power to a distribution company or a bulk power consumer.