ISLAMABAD: The All Pakistan Textile Mills Association (Aptma) has urged the Petroleum Division to immediately review the methodology being used to calculate the levy on gas supplied to industrial captive power plants, arguing that the current formula is based on incorrect assumptions, outdated benchmarks and cost components that do not accurately reflect either prevailing tariffs or the actual operating conditions of export-oriented industries.
In a letter addressed to Petroleum Secretary Hamed Yaqoob Sheikh, Aptma welcomed the government’s decision to replace the Industrial B3 peak electricity tariff with a weighted average of peak and off-peak tariffs in the levy calculation.
The association described the move as an important correction and acknowledged the efforts made to address one of the industry’s longstanding concerns. However, it maintained that several critical issues remain unresolved and continue to inflate the levy imposed on industrial captive power users.
The textile body’s principal demand is that the government review and revise the remaining parameters used in the levy calculation so that only accurate, notified and comparable cost elements are included. According to Aptma, the levy was introduced to equalise the cost of captive power generation with grid electricity, but the current methodology has produced the opposite outcome by imposing an additional burden on industries that have invested in efficient power generation systems.
A major concern raised by the association relates to the use of an off-peak benchmark tariff of Rs28.11 per unit instead of the officially notified Industrial B3 off-peak tariff of Rs23.67 per unit. Industry representatives were informed that the difference results from the inclusion of an MDI-based fixed charge amounting to Rs4.44 per unit. Aptma argues that this treatment is inappropriate because the fixed charge is linked to each consumer’s sanctioned load, maximum demand and operating profile. Since it varies from consumer to consumer, the association says it cannot be converted into a uniform per-unit charge and applied across the board.
Aptma further argues that the Rs4.44 per unit adjustment appears to be based on a load factor of around 30 per cent, which does not reflect the reality of most textile units operating captive co-generation facilities. According to the association, three-shift textile plants typically maintain load factors between 80 and 90 per cent, under which the fixed charge would work out to only Rs1.5 to Rs1.7 per unit.
Even the Power Division’s own benchmark for the textile and apparel sector under the incremental power package assumes a 60 per cent load factor, translating into a fixed charge of approximately Rs2.28 per unit.
Another major issue highlighted by Aptma concerns the gas price used in the levy formula. While the current calculation assumes a gas price of Rs3,500 per MMBtu, the association says captive power plants connected to SNGPL are actually receiving a blend of 75 percent RLNG priced at Rs4,732.76 per MMBtu and 25 percent system gas priced at Rs3,500 per MMBtu. This results in an effective gas price of Rs4,424.57 per MMBtu.
According to Aptma, applying this actual fuel cost to the government’s own methodology would turn the March 2026 levy negative by Rs603 per MMBtu. The association has also challenged the operation and maintenance cost used in the calculation. It says the current benchmark of Rs1.65 per unit is based on a Nepra determination made nearly eight years ago and no longer reflects actual industry conditions. Aptma estimates that current O&M costs for captive generation average around Rs5.58 per unit, more than three times the figure being used in the levy formula.
Further objections have been raised over the inclusion of the Debt Servicing Surcharge of Rs3.23 per unit in the benchmark electricity tariff. According to Aptma, the surcharge is not part of the Nepra-notified tariff and therefore should not be used in determining the comparative cost of grid electricity. The association has also questioned the application of the statutory margin on the benchmark tariff, arguing that the Levy Act provides for an increase in the levy rate itself rather than an adjustment to the benchmark electricity tariff.
Aptma claims that correcting any one of these disputed parameters results in a negative levy, while correcting all three produces a levy of approximately negative Rs810 per MMBtu. This, the association argues, demonstrates that captive generation under prevailing fuel prices and tariffs is already more expensive than purchasing electricity from the national grid.
The textile industry has warned that the levy, in its present form, is penalising efficiency and cost optimisation in the largest export sector. It maintains that the government’s own calculations, when adjusted for actual costs and notified tariffs, show that captive power no longer enjoys the economic advantage that the levy was designed to offset.
Aptma has therefore called on the Petroleum Division to undertake a comprehensive review of the levy formula and ensure that future calculations are based on actual fuel prices, current operating costs, notified tariffs and legally sustainable assumptions. The association argues that such a review is necessary not only for fairness and transparency but also for safeguarding the competitiveness of the export-oriented textile industry.
