ISLAMABAD: The Pakistan Textile Council (PTC) has urged Prime Minister Shehbaz Sharif to reconsider the off-grid (cogeneration) levy framework and advance genuine gas market reform through neutral third-party access, unbundling, and ring-fenced network tariffs.
In a letter addressed to the Prime Minister, PTC Chairman Fawad Anwar submitted a formal representation regarding the recent notification issued by the Ministry of Energy (Petroleum Division), which set the captive power levy at Rs 1,243 per MMBtu for December 2025 under the Off-Grid (Captive Power Plants) Levy Act, 2025.
According to the PTC, the concern is not merely about the quantum of the levy but its structural implications. The Act introduces an executive price overlay “over and above” the sale price notified by Ogra.
READ MORE: Govt slaps Rs1,243/mmbtu new levy on off-grid captive power plants
In a tariff-governed network industry, tariff finality forms the foundation of regulatory credibility. Once a second discretionary layer can be imposed beyond the regulator’s determined price, the regulator’s tariff ceases to be final. This, the Council argues, introduces sovereign overlay risk into fuel planning, contracting, and long-term investment decisions.
The PTC noted that energy-intensive export industries — particularly those operating high-efficiency cogeneration (Combined Heat and Power, CHP) systems — depend on predictable, regulator-led pricing to remain internationally competitive.
The present framework, it said, converts regulated pricing into a provisional baseline subject to executive adjustment. Such unpredictability increases the cost of capital, shortens financing horizons, and directly affects industrial investment decisions.
The Council further argued that the levy framework relies on a non-equivalent benchmark by referencing a delivered-service electricity tariff (Nepra’s B3) to compute a “difference” against gas input cost. A delivered electricity tariff includes energy purchase cost, capacity recovery, network charges, losses, and policy riders.
In contrast, cogeneration cost is a plant-level energy conversion construct driven by fuel input, heat rate, utilization, and useful thermal output. Comparing the two without a disciplined decomposition methodology creates what the PTC termed a structural category error.
Without transparent inclusion and exclusion rules, the computed “difference” cannot be technically reproduced or independently audited.
The statute, the Council contended, does not differentiate between verified high-efficiency cogeneration and ordinary generation. Cogeneration systems recover waste heat and achieve high energy utilization rates, maximizing output per unit of fuel while reducing emissions. Globally, such systems are incentivized as efficient industrial energy configurations.
Taxing cogeneration identically to non-cogeneration systems, the Council argued, inverts the efficiency principles that energy reform seeks to promote.
The law directs levy proceeds toward reducing electricity tariffs for other consumer categories. This indicates that the levy is not tied to gas sector service cost recovery but functions as a cross-subsidy transfer.
Cogeneration operators — who do not utilize electricity transmission and distribution networks for self-generation — are being required to finance burdens within another sector. This, the PTC maintained, conflicts with the fundamental cost-causation principle of utility regulation.
The Council further highlighted the substantial economic burden. Using the SNGPL system as an illustration, the blended system basis is approximately Rs 1,804 per MMBtu.
Captive cogeneration users are already paying about Rs 3,500 per MMBtu — a significant uplift over the blended basis. With the addition of the latest levy of Rs 1,243 per MMBtu, the all-in burden rises to roughly Rs 4,743 per MMBtu. The combined wedge relative to the blended cost basis is therefore nearly Rs 2,939 per MMBtu.
In effect, the PTC argued, efficient export-oriented industries are paying LNG-linked marginal economics while simultaneously financing layered cross-subsidies for both the gas and power sectors.
Recent system developments, it added, demonstrate that suppressing efficient industrial demand does not strengthen the energy system. Industrial RLNG consumption has contracted sharply, national line pack has breached critical thresholds, domestic gas curtailments have occurred, and LNG cargo diversions have increased — outcomes that reflect demand destruction rather than structural reform.
READ MORE: Textile exporters reject new levy on off-grid captive power plants
Fawad Anwar stated that under Pakistan’s “Uraan Pakistan” initiative, the government aims to achieve $60 billion in exports. The textile and apparel sector alone contributes over USD 13 billion annually and employs millions directly and indirectly. Energy pricing stability and cost competitiveness, he emphasized, are fundamental to achieving this national objective.
A framework that penalizes efficient cogeneration and introduces regulatory unpredictability is inconsistent with an export-led growth strategy.
The PTC proposed the following governance-consistent pathway for the Prime Minister’s consideration: (i) restore regulator-led tariff finality by removing the parallel executive overlay over Ogra’s notified price; (ii) establish a verified differentiation framework for high-efficiency cogeneration based on measurable energy utilization rates; (iii) address power-sector fixed-cost recovery challenges within the Nepra tariff architecture rather than through a gas-sector overlay; and (iv) advance genuine gas market reform through neutral third-party access, unbundling, and ring-fenced network tariffs.
“Our objective is not confrontation but correction,” Anwar stated. “We fully support sustainable energy reform, fiscal stability, and system rationalization.
However, reform must be methodologically sound, regulator-led, and consistent with Pakistan’s industrial and export aspirations,” he concluded.
Copyright Business Recorder, 2026
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