KATI urges govt to withdraw levy on captive power plants

ISLAMABAD: The Korangi Association of Trade and Industry (KATI) has urged Federal Minister for Petroleum and Natural Resources, Ali Pervaiz Malik, to immediately withdraw the levy imposed on Captive Power Plants (CPPs), terming it unjustified and economically damaging.

In a letter addressed to the minister, KATI President Ikram Rajput argued that the levy has been justified on the premise of eliminating the differential between captive power generation and grid tariffs. However, he contended that the comparison framework used to calculate this differential is fundamentally flawed.

According to the letter, the government has benchmarked plant-level generation costs against fully loaded grid tariffs that include capacity payments, cross-subsidies, stranded costs, and other system charges that are not causally attributable to captive units. This methodology, Rajput maintained, artificially inflates the perceived cost advantage of captive generation and results in what he described as a punitive overlay rather than true cost parity.

He further pointed out that the uniform thermal efficiency assumption embedded in the levy calculation fails to reflect the operational diversity of industrial cogeneration plants. High-efficiency units that maximize fuel utilization and reduce emissions are being treated the same as conventional generators, discouraging efficiency and penalizing industries that have invested in modern systems.

“The consequences are now visible,” Rajput stated. “Industries are shifting to grid supply not because it is reliable or economical, but because the levy has distorted the economics of self-generation. Yet uninterrupted grid power remains unavailable in several industrial clusters, sanctioned load enhancements require substantial capital outlay, and many units lack viable grid connectivity. In such circumstances, the levy effectively functions as a direct production tax,” the letter further maintained.

He added that industries are already bearing cross-subsidies above the cost of service. Imposing an additional levy, he warned, would further erode competitiveness, compress profit margins, and weaken export capacity.