ISLAMABAD: The International Monetary Fund (IMF) has demanded a substantial levy on gas supply to industrial captive power plants (CPPs) as part of Pakistan’s commitments under the $7 billion Extended Fund Facility (EFF). The aim is to eliminate the cost advantage of in-house electricity generation over grid power.
A structural benchmark under the EFF requires gas disconnections to CPPs by January 2025 to qualify for the second $1 billion tranche in March 2025. The IMF has rejected Pakistan’s plea to revise this benchmark, insisting instead on imposing an additional levy of Rs1,700-1,800 per million British thermal units (mmBtu) on CPPs if power grid reliability is a concern. This would raise the gas price to CPPs from Rs2,800-3,200 to nearly Rs5,000 per mmBtu.
Industrial units argue this move will harm export competitiveness and force them to shift to alternative fuels, including coal. Gas sector officials warn of financial devastation, with losses for Pakistan State Oil (PSO) and gas utilities like SNGPL and SSGCL potentially exceeding Rs400 billion annually.
The government remains bound to its agreement, with the Finance Ministry confirming no changes to the structural benchmark. The IMF asserts that CPPs must either transition to the electricity grid or pay equivalent costs to end distortions.
Petroleum Minister Dr. Musadik Malik has criticized these commitments, citing risks to economic viability and national interests. However, officials claim the benchmark aims to stabilize the power sector while addressing inefficiencies in the gas sector, despite the projected negative impact on LNG-related infrastructure and supply chains.
The IMF’s strict stance underscores its prioritization of structural reforms in Pakistan’s energy sector over short-term industrial incentives.
