IMF Demands Pakistan Impose a 5% Levy to Discourage Gas Use by Captive Power Units

The International Monetary Fund (IMF) has demanded that Pakistan impose a 5% levy on the base price of Rs. 4,500 per MMBTU to discourage gas use by captive power units. Sources told ProPakistani that the Washington-based lender has demanded that Islamabad equal the gas prices with the electricity tariff. The Minister for Finance on Friday chaired a meeting to address the issue of captive power plants (CPPs). It was informed at the meeting that grid parity is achieved at a gas price of Rs. 4,500 per MMBTU. Consequently, it was decided to establish this rate as the base price for captive gas units. It was also decided to impose a levy of 5% on the base price of Rs. 4,500 per MMBTU to further discourage the utilization of captive gas units. This levy will increase to 10%, adjusting the tariff to Rs. 4,950 per MMBTU, and will continue to incrementally rise, reaching up to 20%. Sources said that integrating CPPs into the grid can have the potential to reduce power tariffs for consumers besides government can also save billions of rupees in subsidies on a yearly basis if the federal government decides to supply half of gas to K-Electric (KE) comparable to what captive power plants (CPPs) receive. The total number of CPPs is 1,180, with the majority (797) in the Sui Southern Gas Limited (SSGCL) network. The total self-consumption of electricity by CPPs on indigenous gas and RLNG is estimated at 2000-2500 megawatts (MW). On the other hand, the estimated total allocation of gas to captive and industrial consumers is approximately 350 million cubic feet per day (mmcfd) of indigenous gas and 150 mmcfd of RLNG while industrial connections in the country’s south receive more than 150 mmcfd of domestic gas from this allocation. Earlier, the IMF directed Pakistan to phase out gas-based captive power generation by the end of January 2025.