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This document presents the official text of The Of This document presents the official text of The Off The Grid (Captive Power Plants) Levy Act, 2025, legislation enacted to address economic disparities in the energy sector by imposing a financial levy on industries that generate their own electricity using natural gas. The Act defines "captive power plants" as industrial facilities producing power for self-consumption or surplus sale, and mandates that these plants pay a "levy" (a tax/fee) on top of the standard gas price. The core mechanism of the Act involves calculating this levy based on the difference between the cost of self-generation (gas tariff) and the cost of buying power from the national grid (industrial tariff). The levy is collected by designated gas agents (like Sui Northern or Sui Southern) and paid to the Federal Government. It includes a progressive schedule for increasing the levy rate by 5% to 20% over the following year. The revenue generated is strictly earmarked for reducing electricity tariffs for all consumer categories, and the Act includes enforcement provisions such as gas supply termination for non-payment, as well as provisions allowing the levy to be treated as a deductible business expense for income tax purposes.
2. Key Points, Topics, and Headings
1. Title, Extent, and Commencement
Short Title: The Off The Grid (Captive Power Plants) Levy Act, 2025.
Extent: Applies to the whole of Pakistan.
Commencement: The Act came into force immediately upon enactment (May 30, 2025).
2. Key Definitions (Section 2)
Captive Power Plant: An industrial unit producing power (with or without cogeneration) for self-use or selling surplus to a distribution company.
Levy: The specific charge imposed on natural gas consumption for power generation.
Agent: The gas companies responsible for billing and collecting the levy (Sui Northern, Sui Southern, etc.).
Self-Power Generation Cost: The cost to generate power based on the gas tariff set by OGRA (Oil and Gas Regulatory Authority).
3. Imposition and Collection (Section 3)
The Charge: Every captive power plant must pay a levy on gas consumption.
On Top Of: This levy is in addition to the gas sale price notified by OGRA.
Collection: The "Agent" (gas company) bills the plant, collects the money, and pays it to the Federal Government.
4. Calculation of Rate (Section 4)
The Formula: Rate = (NEPRA Industrial Power Tariff) MINUS (OGRA Gas Self-Generation Cost).
The Logic: The levy captures the "savings" an industry gets by using cheap gas instead of buying expensive grid electricity.
Progressive Increases:
Immediate: +5%
July 2025: +10%
Feb 2026: +15%
Aug 2026: +20%
5. Utilization of Funds (Section 5)
Purpose: The money is used to reduce the power generation tariff for all consumer categories (subsidizing the national grid).
Transparency: An annual report on how the money is spent must be laid before Parliament.
6. Enforcement and Consequences (Section 6)
Non-Payment: If the levy isn't paid, it is recoverable as an arrears of land revenue (under the Public Finance Management Act).
Ultimate Penalty: Persistent default leads to termination of gas supplies to the captive plant.
7. Income Tax Allowance (Section 7)
Deduction: The levy paid is treated as a business expenditure, meaning industries can deduct it from their profits when calculating income tax.
3. Easy Explanation / Presentation Guide
If you were presenting this Act, here is the "Easy Explanation" breakdown:
Slide 1: What is the Problem?
The Situation: Some big factories (industries) generate their own electricity using gas ("Captive Power Plants") instead of buying from the national grid.
The Unfairness: Gas for industries is often cheaper than the electricity sold on the grid. This means these industries get "cheap power" while everyone else pays higher rates to keep the national grid running.
Slide 2: The Solution – The "Levy"
The Act: The government passes a law to tax these "off the grid" power plants.
The Name: "Off The Grid (Captive Power Plants) Levy Act, 2025."
The Mechanism: You still buy gas, but you pay an extra fee (levy) on top of the gas price.
Slide 3: How is the Tax Calculated?
The Math: The government looks at two numbers:
Cost of Grid Power (What you would have paid if you bought electricity).
Cost of Gas Generation (What it costs you to make it yourself).
The Levy: You pay the difference. The government essentially says, "You saved money by making your own power; now you have to give those savings back."
Slide 4: Increasing the Pressure
The tax doesn't stay flat. It goes up over time to encourage industries to either join the grid or pay their fair share.
Timeline:
Starts at +5%.
Rises to +20% by August 2026.
Slide 5: Where does the Money Go?
Cross-Subsidization: The money collected from these big industries isn't kept by the government for general spending.
The Goal: It is used to lower the electricity bill (tariff) for regular consumers (households, small businesses) who buy from the national grid.
Slide 6: What if you don't pay?
Collection: The gas company (Sui Northern/Southern) acts as the tax collector. They add it to the bill.
The Hammer: If you refuse to pay, the government will cut off your gas supply.
Slide 7: A Small Sweetener
Tax Break: Since the levy is a mandatory cost, the government allows industries to deduct it from their Income Tax. It counts as a business expense.
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