Power Sector Seeks Fuel Levy Cut as Rs33bn Adjustment Looms

Pakistan’s manufacturing representatives and the federal power division have jointly called for the petroleum levy on furnace oil and high-speed diesel used in electricity generation to be reduced or removed. The proposal emerged as the national power purchaser sought permission to recover nearly Rs33 billion through an additional fuel cost adjustment for electricity consumed in September.

The Central Power Purchasing Agency has requested an adjustment of Rs2.56 per unit, which would be collected through November electricity bills if approved by the National Electric Power Regulatory Authority. Officials told the regulator that September’s actual fuel expense reached Rs10.022 per unit, compared with the reference cost of Rs7.46 already incorporated into tariffs.

The estimated financial impact of the requested adjustment is Rs32.76 billion. However, officials said the net month-to-month increase would be about Rs1.45 per unit because an existing positive adjustment being charged in October is due to expire before the proposed November recovery takes effect. The final rate and its application remain subject to the regulator’s decision.

Industrial representatives argued during the public hearing that petroleum levies were unnecessarily increasing the cost of generating electricity from furnace oil and diesel. They cited charges of approximately Rs76,000 per tonne on furnace oil and Rs80 per litre on diesel, estimating that these levies were contributing around Rs10 per unit to generation costs.

Power-sector representatives confirmed that diesel and furnace oil supplied about 3.6 per cent of grid electricity during September. Reliance on these expensive fuels increased because liquefied natural gas and other comparatively cheaper energy sources were unavailable, while regional disruptions also affected the country’s fuel options.

According to the figures presented at the hearing, diesel-based generation reached 213 gigawatt-hours and cost Rs62.14 per unit, compared with 80 gigawatt-hours at Rs54 per unit in August. Furnace-oil generation declined from 321 gigawatt-hours in August to 263 gigawatt-hours in September, while its generation cost fell slightly to Rs44.86 per unit.

Industry representatives claimed that removing the levies could lower generation costs from around Rs62 per unit to between Rs44 and Rs50. They also questioned discrepancies in submitted generation data, an earlier Rs16 billion adjustment linked to LNG prices and coal procurement practices at the Port Qasim power plant. The regulator said only prudent coal costs would be accepted and any unjustified expense would have to be absorbed by the producer.

Overall electricity demand increased by 6.5 per cent during September, while industrial consumption rose by 6.7 per cent. The regulator must now examine the fuel-cost calculations, data consistency and procurement concerns before determining how much of the requested adjustment can be passed on to consumers. Its decision will directly affect November bills and could influence the government’s wider effort to reduce industrial electricity costs and improve export competitiveness.