The government is gearing up to meet another significant condition set by the International Monetary Fund (IMF) to secure the next installment of its financial assistance. To comply with IMF demands, the government is preparing to impose a phased levy on gas usage for captive power plants.
According to sources, this levy will be introduced step by step to prevent the complete shutdown of gas supplies to captive power plants. The Ministry of Energy has indicated that the IMF has shown flexibility regarding the gas supply for these plants. However, before the next tranche is released, the government plans to introduce the levy in stages.
In the first phase, starting this January, a 5% levy is expected to be imposed on the gas provided to captive power plants. In the second phase, this levy could be increased to 10%, as per recommendations. The goal is to bring the gas prices for captive industries closer to the rates of liquefied natural gas (LNG). This adjustment aims to minimize the pricing gap between captive power plants and other industries.
Captive power plants are facilities where industries generate their electricity using gas, avoiding reliance on the national power grid. On the other hand, non-captive industries purchase electricity from the grid at higher rates. This discrepancy has raised concerns for the IMF, which has expressed reservations about the unequal energy pricing structure for captive and non-captive industries.
The levy is intended to create a level playing field between captive power plants and other industries, reducing the reliance on subsidized gas for self-generated electricity. The Ministry of Energy aims to align the captive industry’s gas prices with market trends, ensuring fairness and efficiency in energy usage.
This move comes as part of broader efforts by the government to fulfill IMF conditions and secure crucial financial support. It highlights the balancing act required to manage economic challenges while meeting international commitments.
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