ISLAMABAD: The Pakistan Textile Council (PTC) has urged the Prime Minister to take up with the IMF the reclassification of cogeneration captive power (CPP) units as industrial gas units and the withdrawal of the Off-Grid (Captive Power Plants) Levy. In a letter addressed to Prime Minister Shehbaz Sharif, PTC Chairman Fawad Anwar stated that as the government is currently engaged with the IMF mission, discussions on the off-grid levy should be grounded in measurable economic outcomes and pricing integrity. According to the PTC, experience over the past year shows that the levy framework has created significant distortions in gas pricing without delivering structural improvements in either the gas or power sectors. READ MORE: Govt slaps Rs1,243/mmbtu new levy on off-grid captive power plants The issue, it said, is no longer about the rate alone, but about how commodity pricing is being structured and the economic signals being sent to productive industries. At present, the effective tariff for externally competitive industrial captive users has reached nearly $17 per MMBtu, despite the underlying indigenous gas cost being below $4 per MMBtu. The resulting gap of approximately $13 per MMBtu — around Rs 3,700 per MMBtu — does not reflect upstream costs but is the cumulative effect of cross-subsidies, LNG portfolio adjustments, and the off-grid levy. The PTC noted that OGRA’s prescribed SNGPL price, inclusive of revenue requirements and wellhead cost, stood at around Rs 1,330 per MMBtu on a cost-of-service basis. Following the removal of RLNG ring-fencing and the inclusion of approximately 24 LNG cargoes in the FY2025–26 price build-up, the prescribed level increased to about Rs 1,895 per MMBtu, with the notified price at nearly Rs 1,804 per MMBtu after adjustments and cargo diversions. Even prior to the levy, captive users were paying approximately Rs 3,500 per MMBtu against a blended system cost of around Rs 1,804 per MMBtu — reflecting a substantial pre-existing cross-subsidy burden estimated at roughly Rs 140 billion. The additional levy of Rs 1,243 per MMBtu imposed in December 2025 has further increased the burden. In practical terms, the Council argued, industrial consumers are absorbing three layers of costs simultaneously: surplus LNG portfolio costs arising from power-sector demand misalignment; an estimated Rs 1,700 per MMBtu cross-subsidy for piped residential consumers; and the off-grid captive levy. This cumulative pricing structure pushes tariffs well beyond cost-of-service principles and materially undermines competitiveness. The PTC further maintained that highly efficient cogeneration units operating within industrial premises achieve energy utilization rates of 70–90 percent and incur negligible transmission and distribution losses. These systems convert fuel into productive output with high efficiency, yet they are treated the same as conventional captive generation units for levy purposes — undermining efficiency incentives and long-term industrial investment planning. The Council said the government’s engagement with the IMF presents an opportunity to demonstrate that the levy mechanism, in its current form, has proven counterproductive. It has compressed industrial demand, increased uncertainty in gas contracting, and transferred sectoral inefficiencies into commodity pricing. Reform credibility, it argued, is strengthened when policy adjustments reflect empirical outcomes. The PTC proposed two corrective measures: first, verified high-efficiency cogeneration units should be reclassified as industrial gas connections through a certification protocol based on measurable energy-utilization benchmarks; and second, the Off-Grid (Captive Power Plants) Levy should be withdrawn so that gas pricing reverts to regulator-led, cost-based determination without parallel overlays. Pakistan’s export sector, the Council emphasized, remains one of the few externally competitive pillars of macroeconomic stability. Embedding cross-sector inefficiencies into commodity tariffs weakens allocative efficiency and erodes competitiveness at a time when foreign exchange resilience is critical. “We remain fully supportive of sustainable reform and fiscal discipline. However, policy instruments must preserve pricing integrity and reward efficiency. A timely recalibration during the IMF engagement would reinforce Pakistan’s commitment to evidence-based reform while protecting productive capacity,” Anwar concluded. Copyright Business Recorder, 2026