Pakistan imposes off-the-grid levy on captive power plants

March 12, 2025 (MLN): To impose an off-the-grid levy on natural gas-based captive power plants, the President of the Islamic Republic of Pakistan, Asif Ali Zardari, has promulgated an ordinance.

The Ordinance, published for general information, seeks to validate, impose, and collect the levy for the consumption of natural gas by captive power plants.

The Off the Grid (Captive Power Plants) Levy Ordinance, 2025, extends to the whole of Pakistan and comes into force immediately, according to a notice published by the gazette of pakistan.

Under Section 3, captive power plants are required to pay a levy to the Federal Government on their consumption of natural gas or RLNG, in addition to the sale price notified under the Oil and Gas Regulatory Authority Ordinance, 2002.

The rate of the levy will be determined and notified by the Federal Government in the official Gazette from time to time.

The agent responsible for billing and collection of the levy will ensure its onward payment to the Federal Government as prescribed.

Before notifying the levy, the concerned divisions under the Rules of Business, 1973, will calculate the rate by considering the difference between the power tariff of the industrial B3 category, as notified by NEPRA, and the self-power generation cost of captive power plants at the gas tariff set by OGRA.

The rate of levy will increase incrementally—by five percent immediately, ten percent by July 2025, fifteen percent by February 2026, and twenty percent by August 2026.

According to Section 5, the Federal Government will utilize the levy to reduce power generation tariffs for all consumer categories within the power sector.

An annual report regarding the utilization of the levy will be submitted to both Houses of Majlis-e-Shoora (Parliament) three months after the conclusion of each fiscal year.

Section 6 outlines the consequences of non-payment, stating that unpaid levies will be recoverable under the Public Finance Management Act, 2019.

In cases of persistent default, the agent will be authorized to terminate gas supplies to the defaulting captive power plants.

Under Section 7, the levy paid by captive power plants will be considered an expenditure allowable under the Income Tax Ordinance, 2001, for computing profits or gains.

The Federal Government has the power to make rules through notifications in the official Gazette to carry out the purposes of this Ordinance under Section 8.

Additionally, it may amend the Schedule as deemed necessary under Section 9.

Section 10 grants the President the authority to issue orders to remove any difficulties that may arise in implementing the provisions of this Ordinance, ensuring smooth execution of its objectives.

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