The Islamabad High Court (IHC) has temporarily suspended the government’s gas levy on captive power plants (CPPs), providing relief to industrial power producers.
The levy, which was announced on March 7, 2025, proposed a phased increase, starting with an immediate 5% hike, followed by incremental increases to 10% in July 2025, 15% in February 2026, and 20% in August 2026.
Legal Challenge Against the Gas Levy
The court’s decision comes in response to a petition filed by companies operating five power plants, arguing that the levy is unconstitutional and places an unfair financial burden on industries reliant on natural gas or LNG for power generation.
The petitioners, represented by senior lawyer Makhdoom Ali Khan.
- Declare the 2025 Ordinance unconstitutional.
- Prevent the authorities from enforcing or recovering the levy.
- Provide immediate relief to industries affected by the additional financial burden.
Justice Khadim Hussain Soomro, acknowledging the petitioners’ arguments, issued notices to the respondents and scheduled the next hearing for April 30, 2025.
- Secretary of the Petroleum Division
- Director General of the Oil and Gas Regulatory Authority (OGRA)
- CEOs of Sui Southern Gas Company Limited (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL)
- Punjab Industrial Estate Development and Management Company
Economic and Industrial Impact
The gas levy was introduced as part of the government’s broader strategy to increase revenue generation from the energy sector. However, industrial stakeholders argue that higher energy costs will:
- Reduce competitiveness of local industries in export markets.
- Increase production costs, leading to potential price hikes for consumers.
- Discourage investment in the manufacturing and power generation sectors.
Captive power plants, which IHC generate electricity for industrial use, play a crucial role in ensuring uninterrupted power supply.
Many businesses rely on natural gas and LNG due to frequent electricity shortages from the national grid. The levy, if implemented, would significantly increase operational costs for industries.
The government has defended the gas levy, stating that it is necessary for energy sector reforms and to reduce reliance on subsidies.
In a separate development, the government had planned to announce an Rs8 per unit reduction in electricity tariffs on March 23, 2025.
