ISLAMABAD: Pakistan’s two state-owned gas utilities have suffered a combined revenue loss of nearly Rs100 billion after the government sharply raised gas prices for captive power plants (CPPs) of the export-oriented industry and imposed an off-the-grid levy under the International Monetary Fund’s (IMF) programme, officials and industry sources said.
The hike in gas prices to Rs3,500 per MMBtu has made gas unaffordable for exporters, triggering a steep fall in consumption. In the Sui Northern Gas Pipelines Limited (SNGPL) network, gas consumption by export industries has dropped to 25 million cubic feet per day (MMcfd) from 180 MMcfd, while in Sui Southern Gas Company (SSGC) areas it has declined to 90 MMcfd from 210 MMcfd.
Despite the massive hit to gas utilities, the government has so far collected only Rs9 billion under the off-the-grid levy, far short of the Rs105 billion revenue target set for the current fiscal year.
Industry representatives say the twin blow of higher gas prices and levy has badly hurt exports. Around 150 textile units have already shut down, as gas prices have surged to $15.36 per MMBtu, well above the international LNG prices, eroding the competitiveness of Pakistan’s exporters.
The impact has widened following the government’s decision to extend the off-the-grid levy to third-party gas suppliers — private firms that purchase gas from exploration and production (E&P) companies through auctions and sell it to
industrial consumers after paying windfall tax, royalty, transportation charges and more than 100 percent unaccounted-for gas (UFG).
Under the new arrangement, the previously deregulated third-party market will face tighter controls, with the Oil and Gas Regulatory Authority (Ogra) set to determine monthly tariffs after factoring in the off-the-grid levy.
Third-party sales were allowed under the amended 2012 E&P Policy, which permits E&P companies to sell up to 35 percent of their gas to private buyers at auctioned prices. The policy, approved by the prime minister, was designed to address E&P companies’ liquidity problems by ensuring advance payments and higher returns, while unlocking $5 billion in promised investment in exploration and production.
Industry sources warn that the imposition of off-the-grid levy on third-party gas has effectively undermined the policy, discouraging investment and distorting the gas market. Exporters are already struggling with electricity tariffs of around 13 cents per unit, significantly higher than the regional average of 5 to 7.5 cents per unit.
The industry is demanding the withdrawal of the Rs102 billion cross-subsidy it provides to domestic power consumers, arguing that its removal could bring tariffs down to around 9 cents per unit. Persistently high input costs have forced the closure of nearly 150 textile units across the country, while Pakistan’s exports have been on a declining trend since October 2025, industry sources said.
Meanwhile, SSGC has sought permission to impose the levy on Fauji Fertilizer Company (FFC) due to its captive power generation. The Petroleum Division has referred the matter to the Law Division for legal clarification.
Officials in the Power Division argue that the fertilizer sector does not fall under the export-oriented industrial category and, therefore, cannot be subjected to the levy. “The IMF has sought the imposition of off-the-grid levy on captive power plants of the export industry, not on fertilizer companies,” a Petroleum Division official said. The off-the-grid levy was introduced at 5 percent in February 2025, increased to 10 percent in July 2025, and is scheduled to rise to 15 percent in February 2026 and 20 percent from August 2026.
The government says the levy is aimed at pushing industries to shift to grid electricity, as Pakistan’s installed power capacity stands at 45,000 megawatts against peak summer demand of 28,000 megawatts. Revenue from the levy is intended to help reduce electricity tariffs.
So far, the government has collected only Rs9 billion under the off-the-grid levy — an amount too small to have any meaningful impact on electricity tariffs — while the gas utilities have suffered an estimated Rs100 billion loss in revenue.
