Petroleum Levy in Pakistan Set to Rise Under IMF Commitments

ISLAMABAD: The federal government has announced a substantial increase in the petroleum levy in Pakistan for the fiscal year 2025-26, in line with the conditions of the International Monetary Fund’s (IMF) Resilience and Sustainability Facility (RSF) programme. According to a summary submitted to the cabinet, the petroleum levy will see gradual increases on both petrol and diesel over the coming year.

Effective immediately, the levy on diesel will rise by Rs2.5 per litre, bringing it to Rs57.5 per litre, while the levy on petrol will increase to Rs62.5 per litre. These rates are expected to rise further to Rs 70 per litre for diesel and Rs 80 per litre for petrol during FY2025-26.

The Ministry of Finance projects that this increase in the petroleum levy in Pakistan will generate Rs1,281 billion in revenue for the next fiscal year, up by Rs307 billion compared to previous estimates. The levy is collected under the Petroleum Products (Petroleum Levy) Ordinance, 1961, and recent amendments have been proposed to accommodate the new rates and future adjustments.

Carbon Levy on Petroleum Products

Additionally, the government plans to introduce a new section, 3A, in the Petroleum Levy Ordinance to allow the federal government to impose a carbon levy on petroleum products. This levy will be directed towards climate mitigation and resilience initiatives and reflected as a separate entry in the federal budget.

In FY2023-24, the petroleum levy stood at Rs60 per litre for petrol and Rs50 for diesel, with Rs10 for other petroleum products. The collected funds were primarily used to finance subsidies and the power purchase price.

The Law Ministry has confirmed that all proposed changes comply with existing legal and constitutional frameworks. The summary, signed by Finance Secretary Chaudhry Agha, has been forwarded for cabinet approval.

The proposed adjustments to the petroleum levy in Pakistan are part of broader fiscal reforms tied to ongoing negotiations with the IMF aimed at stabilising Pakistan’s economy and enhancing public sector sustainability.