APTMA urges govt to re-evaluate grid levy on industrial CPPs

ISLAMABAD: All Pakistan Textile Mills Association (APTMA) has asked the government to reevaluate grid levy on industrial Captive Power Plants (CPPs) for peak and off-peak hours in accordance with the reduced electricity rates.

In a letter to Secretary, Petroleum Division, Momin Agha, Secretary General, Aptma, Shahid Sattar said that global energy prices have dropped significantly in recent weeks, with Brent crude falling from around $75 to $65 per barrel, and expected to drop to $50 per barrel, largely due to global economic pressures such as US protectionist policies, the ongoing US-China trade conflict, and Chinese tariffs on American LNG.

While this decline is beneficial for most manufacturing economies, it poses a serious challenge for Pakistan’s export industry.

Aptma claimed that as global energy prices fall, regional competitors are gaining access to gas at much lower rates-between $5-7/MMBtu. In contrast, gas for captive power generation in Pakistan is Rs. 4,291/MMBtu ($15.38), including the levy of Rs. 791/MMBtu. This puts Pakistan’s exporters at a severe disadvantage.

Countries like Bangladesh, where 80% of the industry runs on gas-based captive power, and Vietnam, also with a significant share of industry reliant on captive generation, will benefit greatly from cheaper gas prices. Similarly, industries in India, China, Bangladesh and Vietnam are paying just 5-9 cents/kWh for electricity, while Pakistani industrial consumers face 11-13 cents/kWh from the grid.

For an energy-intensive and low-margin sector like textiles, this energy cost gap makes it impossible to compete internationally.

Pakistan’s long-term LNG contracts offer an opportunity to supply gas to industries at significantly more competitive rates. At a Brent crude price of $60 per barrel, LNG import prices under the current contracts are approximately $6.12/MMBtu (Qatar Petroleum, 10.2% slope), $8.02/MMBtu (Qatar Gas, 13.37% slope), and $7.28/MMBtu (ENI, 12.14% slope). These rates are significantly lower than the current tariff for captive power consumers. By supplying them with RLNG at full cost, excluding additional cross subsidies and surcharges, Pakistan can significantly enhance the competitiveness of its industries. According to Aptma since the notification of the Grid Transition Levy at Rs. 791/MMBtu, grid electricity tariffs have undergone downward adjustments. The applicable reductions-Rs. 1.70 under the Tariff Differential Subsidy (TDS), Rs. 1.90 on account of the Quarterly Tariff Adjustment (QTA), and Rs. 1.66 on account of the Fuel Price Adjustment (FPA)-collectively bring down the effective basis for comparison. As a result, the levy is directly reduced from Rs. 791/MMBtu to Rs. 208/MMBtu.

Moreover, the levy has been calculated using the peak industrial power tariff, which is only applicable for 4 out of 24 hours. The calculation must also account for the off-peak tariff, applicable during the remaining 20 hours. A separate levy should be established based on the off-peak tariff and applied accordingly during the grid’s off-peak hours to accurately reflect actual power costs.

Additionally, both SSGC and SNGPL are currently applying the levy retrospectively to gas consumed from January 2025 onwards. This practice is in clear violation of applicable legal provisions, which require that any charges, taxes, etc., be imposed only from the date of their official notification as the Grid Transition.

Aptma further stated that levy was notified on March 7, 2025, any billing prior to this date is unlawful, urging that that SNGPL and SSGC be directed to immediately correct their billing to reflect the proper effective date of the levy, ie, March 7, 2025 onwards.

The Association argued that cogeneration systems, which simultaneously produce electricity and thermal energy (steam/hot water), are particularly disadvantaged under the current pricing regime. While single-cycle captive power users have largely transitioned to grid electricity, except where grid infrastructure is unavailable/unsuitable, cogeneration users cannot do so due to their integrated thermal energy requirements. Gas is supplied for industrial processes at Rs. 2,200/MMBtu, set to rise as SNGPL has requested a 40% increase and SSGC a 145% increase in their respective prescribed prices for natural gas for FY26. Given that cogeneration fulfills both power and process requirements and is by far the most effective use of gas resources, it is unjustified to subject these consumers to the higher captive gas price of Rs. 4,291/MMBtu.

Aptma said the Supreme Court, in the case of Bulleh Shah Packaging vs. Pakistan, concluded that “consumers with a contract for supply of natural gas for industrial use and having in- house electricity generation facility for self-consumption (with or without cogeneration) fall in the category of industrial consumers and are subject to the corresponding tariff, unless the generation facility is a Captive Power Plant as per NEPRA Regulations”, i.e. it intends to sell surplus power to a Distribution Company or bulk-power consumer.