ISLAMABAD: The Islamabad High Court (IHC) has stayed the government’s plan to collect Rs100 billion from industrial captive power plants under an IMF agreement, which imposed a Rs791 per mmBtu levy to discourage the use of gas by industries for power generation, forcing them to shift to the national grid and using that revenue to cut electricity costs for consumers.

Justice Khadim Hussain Soomro of the IHC suspended the implementation of the levy following a petition filed by 20 major industrial companies, including Engro Polymer and Chemicals Ltd, Lucky Cement Ltd, and Gul Ahmed Textile Mills Ltd. The court’s interim order will remain in effect until the next hearing, scheduled for April 30.

The petitioners challenged the Off the Grid (Captive Power Plants) Levy Ordinance, 2025, arguing that it was unconstitutional. They contended that the ordinance, promulgated by the president on Jan 30, bypassed parliamentary authority and violated Article 77 of the Constitution, which stipulates that taxes can only be imposed through an act of parliament.

The industrial groups further argued that they already pay sales tax on natural gas under the Sales Tax Act, 1990, and that the grid levy amounts to double taxation. They also claimed that the charge could not be classified as a “fee,” as the government does not provide any corresponding service in return.

Represented by senior advocate Makhdoom Ali Khan, the petitioners maintained that the Oil and Gas Regulatory Authority (Ogra) is the sole entity authorised to determine gas tariffs under the Ogra Ordinance, 2002. They argued that the separate imposition of the levy exceeds the federal government’s jurisdiction.

Citing Supreme Court precedents (PLD 2015 SC 354 and 2013 SCMR 1337), the petitioners emphasised that executive-imposed taxes without parliamentary approval are unlawful.

The court has issued notices to all relevant parties, directing them to respond by 30 April. Until then, the government is barred from enforcing the levy.

Published in Dawn, March 28th, 2025