Gas hike levy slash nearly Rs100bn from state utilities
Pakistan’s two state owned gas companies Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company have suffered combined revenue loss of Gas hike levy slash nearly Rs100bn from state utilities after the government sharply increased gas prices for captive power plant used by export oriented industries and imposed an off the-grid levy under the IMF program and Gas tariffs for captive power were raised to around Rs3500 per MMBtu making gas unaffordable for exporters and causing a dramatic fall in industrial consumption.
In SNGPL’s network industrial gas usage has dropped to 25 million cubic feet per day (MMcfd) from 180 MMcfd, while in SSGC’s system consumption has declined to 90 MMcfd from 210 MMcfd, according to industry sources.
Off the Grid Levy Fail to Meet Revenue Target
Despite the steep tariff increase the government has collected only Rs9 billion from the off the grid levy so far far below the Rs105 billion target for the current fiscal year and The levy introduced to discourage captive power generation and push industries onto the national electricity grid, has so far failed to compensate for the collapse in gas demand.
Officials have acknowledged that the current level of collections is too small to make any meaningful reduction in electricity tariffs.
Exporters Hit Hard as Energy Costs Surge
Industry representatives say gas prices have risen to nearly $15.36 per MMBtu even higher than imported LNG rates severely damaging export competitiveness.
They report that around 150 textile units have already shut down due to soaring input costs and Exporters also highlight that electricity tariffs remain near 13 cents per unit compared to a regional average of 5 to 7.5 cents, making Pakistani exports increasingly uncompetitive.
Business leaders warned that persistently high energy costs have contributed to falling exports since October 2025, deepening pressure on the external account.
Third-Party Gas Market Also Impacted
The impact has widened after the government extended the levy to third-party gas suppliers — private companies that buy gas from exploration and production firms through auctions and sell it to industrial consumers.
Previously deregulated under the amended 2012 E&P Policy, third-party sales allowed producers to sell up to 35% of gas at market prices to ease liquidity constraints and attract investment.
Industry sources said bringing these supplies under monthly tariff determination by OGRA, after adding the levy, has weakened investor confidence and undermined the original policy objective.
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Legal Questions Over Fertilizer Sector Application
Separately, SSGC has sought permission to apply the levy to Fauji Fertilizer Company due to its captive power generation. The Petroleum Division has referred the matter to the Law Division for legal advice.
Officials clarified that the levy is meant for captive power plants of export-oriented industries, not fertilizer manufacturers, creating further uncertainty in the market.
Levy Set to Rise Further in 2026
The off the grid levy was introduced at 5% in February 2025 increased to 10% in July 2025 and is scheduled to rise to 15% in February 2026 and 20% from August 2026. With gas demand already collapsing, industry leaders warn that further increases could deepen closures, job loss and export decline.
Conclusion
Gas hike levy slash nearly Rs100bn from state utilities and the government’s strategy to force industries onto the electricity grid through higher captive gas prices and an off-the-grid levy has so far backfired. Instead of boosting revenue, it has triggered a steep fall in gas consumption, inflicted nearly Rs100 billion in losses on state utilities, and weakened Pakistan’s export base.