The Pakistan Textile Council (PTC) has formally approached Prime Minister Shehbaz Sharif with a request that could significantly reshape industrial energy pricing. The Council wants the government to take up the matter with the International Monetary Fund (IMF): remove the Off-Grid (Captive Power Plants) Levy and treat industrial cogeneration units as regular industrial gas connections.
At the heart of the issue lies a sharp mismatch between the actual cost of locally produced gas and what export-oriented industries are ultimately paying.
The Cost Gap: From $4 to $17
According to PTC, indigenous gas costs less than $4 per MMBtu at source. Yet industrial captive power users are effectively paying close to $17 per MMBtu. The difference, the Council argues, is not due to upstream production costs but layers of policy-driven adjustments, including:
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Cross-subsidies to other consumer categories
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LNG portfolio and cargo adjustments
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The Off-Grid Captive Power Levy
The result is a pricing structure that textile manufacturers say has distorted market signals and reduced competitiveness without fixing structural inefficiencies in the gas or electricity sectors.
How Pricing Has Shifted
Figures referenced from the Oil and Gas Regulatory Authority (OGRA) show that the prescribed cost-of-service gas price for SNGPL was significantly lower than what captive users now pay.
Even before the latest levy, captive consumers were paying nearly double the blended system cost. The additional levy imposed in December 2025 added another substantial burden per MMBtu, pushing effective costs even higher.
From the industry’s perspective, this means exporters are absorbing billions of rupees in cross-subsidy costs — including support for residential consumers and surplus LNG expenses tied to power-sector demand fluctuations.
Why Cogeneration Is Different
A central demand of PTC is the reclassification of high-efficiency cogeneration plants.
Unlike conventional captive power setups, cogeneration (combined heat and power) systems:
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Achieve energy efficiency levels between 70% and 90%
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Operate on-site within industrial premises
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Avoid significant transmission and distribution losses
The Council argues that taxing these efficient systems under the same levy framework discourages energy optimization and undermines long-term investment planning.
In simple terms, firms that invest in efficient energy use are being penalized rather than rewarded.
What the Textile Sector Is Proposing
PTC has outlined two practical steps:
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Create a Certification Mechanism
Establish measurable efficiency benchmarks and certify high-performing cogeneration units as industrial gas connections rather than captive power plants. -
Withdraw the Off-Grid Levy
Return to a regulator-led, cost-based pricing model that reflects actual gas costs instead of embedding cross-sector inefficiencies into industrial tariffs.
The timing is strategic. With Pakistan currently engaged in discussions with the IMF, the Council believes this is an opportunity to reassess whether the levy achieves its intended fiscal and structural objectives — or simply shifts systemic inefficiencies onto export manufacturers.
The Bigger Economic Question
Textiles remain one of Pakistan’s largest sources of foreign exchange and industrial employment. In a fragile macroeconomic environment, export competitiveness is not just a sectoral concern — it is a national priority.
The Council has made it clear that it supports fiscal discipline. However, it argues that sustainability should not come at the expense of efficiency or global competitiveness. When energy tariffs include embedded cross-subsidies and policy surcharges unrelated to production cost, exporters face a disadvantage in international markets.
The debate, therefore, goes beyond a single levy. It raises a broader policy question: Should industrial energy pricing reflect actual cost structures, or should it continue to carry the weight of broader sectoral imbalances?
As discussions with the IMF proceed, the government’s response could shape the trajectory of industrial energy reform — and with it, the competitiveness of Pakistan’s export economy.