ISLAMABAD: The Federal Constitutional Court (FCC) is set to resume hearing of a case concerning the collection of a levy on gas supplied to industrial captive power plants (CPPs) from July 15.
A two-member bench, comprising Chief Justice Amin-ud-Din Khan and Justice Aamir Farooq, in the last hearing had issued notice to National Electric Power Regulatory Authority (Nepra) and others.
As part of an International Monetary Fund-backed reform programme, the off-grid (Captive Power Plants) Levy Act 2025 was passed by the Parliament to impose a progressive levy on natural gas/ RLNG consumed by industrial, including fertilizer, CPPs to encourage grid transition and subsidize power tariffs.
Under the legislation, the levy was increased progressively. It rose by five percent over the industrial tariff initially, moving to 10 percent from August 2025, 15 percent from February 2026, and stabilising at 20 percent from August 2026 onwards.
The levy is charged under Section 3 of the Act, which was signed by the President of Pakistan in June 2025.
Also read: CPPs gas levy case: FCC issues notices to power regulator, other respondents
A division bench of the Lahore High Court (LHC) in its judgment announced on 12-02-2026 declared that the impugned notifications and the impugned bills, issued in pursuance thereof, imposing and seeking recovery of the impugned Off the Grid Captive Power Plants Levy retrospectively, are set aside/ annulled being ultra vires the provisions of the Ordinance, 2025/ Act, 2025. It directed that any amount collected from the petitioners by the respondents shall be credited to the bills for the upcoming months.
The Sindh High Court (SHC) in January this year ruled that the collection of a levy imposed on gas supply to industrial captive power plants (CPPs) with retrospective effect was ultra vires (beyond legal authority) the relevant law.
The SHC noted that the levy was to be calculated in accordance with the mechanism envisioned under Section 4 of the Off-Grid Power Plants Levy Act, 2025, and could only become operative after the rate had been calculated and duly notified.
It also noted that statutory notifications could not operate retrospectively in the absence of express authorisation by the legislature, except where they were beneficial or procedural in nature. It was observed that the notifications in question did not provide for retrospective application and that Sections 3 and 4 of the law did not envisage the levy being imposed retrospectively.
The Islamabad High Court (IHC) on 28th March 2025 had put a hold on a levy applied to natural gas and RLNG used by captive power plants (CPPs), blocking its enforcement until April 30, 2025.
Copyright Business Recorder, 2026
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