The government has imposed a levy on the captive power plants (CPPs) being run by fertilizer industry.

Different industries including textile and fertilizer have been consuming gas to run captive power plants to generate electricity for their domestic use.

As part of an IMF-backed reform program, the government had introduced the Off the Grid (Captive Power Plants) Levy Act, 2025 which empowered the federal government to impose a levy on natural gas-based CPPs.

Earlier, the government had imposed a levy on gas being supplied by third party to the captive power plants. It was also imposed on captive power plants being run by textile industry.Power Division rejects APTMA claims on IGCEP as flawed

Sources told NewzTodays that government has recently imposed a levy on the fertilizer plants which are using domestic gas or LNG to run captive power plants to meet their electricity demand.

Currently, the Mari Energies had allocated 200 mmcfd gas for fertilizer industry. The exploration companies have also allocated low pressure gas for fertilizer industry. Sources said that imposition of levy will discourage use of gas for captive power plants in fertilizer industry.

According to official memorandum issued by petroleum division, in response to a query raised, under Section 2(c) of the Act, a ‘captive power plant’ means an industrial undertaking or unit carrying out the activity of power production (with or without cogeneration) for self-consumption or for sale of surplus power to a distribution company or a bulk power consumer.”

Petroleum division further said that further, Section 3(1) of the Act provides that subject to Section 4, every captive power plant shall pay to the Federal Government a levy on consumption of natural gas or RLNG…”

“ Accordingly, if natural gas or RLNG is utilized by a fertilizer plant as feed-stock or as fuel-stock it would not fall under the definition of captive power and thus the levy under Section 3 of the Act would not be attracted. However, if the gas or RLNG is used for power production as provided then the levy under Section 3 would be attracted,” petroleum division said.

The Petroleum Division had notified earlier the new rate of levy for the off-grid Captive Power Plants, ie, Rs 690 per million British thermal units (mmbtu) for August 2025.

The parliament had passed the Off the Grid (Captive Power Plants) Levy Act, 2025 aimed at imposing a levy on natural gas and RLNG consumption by captive power plants.

According to the law, the levy was aimed at using to reduce power tariffs across all consumer categories, excluding lifeline users.

Under the Act, the government had decided to charge a 5 percent fixed margin over the notified industrial tariff. It was to be raised to 10 percent from August 2025, 15 percent from February 2026, and stabilizing at 20 percent from August 2026 onward.