Petroleum levy should not be a fiscal tool, says forum

The Parliamentary Forum on Energy and Economy on Thursday warned that steep increases in the Petroleum Development Levy (PDL) have significantly fuelled inflation, disproportionately burdened low‑income households, and exposed deep structural failures in Pakistan’s energy and fiscal governance, particularly in the wake of the Persian Gulf crisis.

The forum emphasised that under no circumstances should petroleum levy be used as a revenue measure or a measure for managing fiscal measures.

Speaking at high‑level policy briefing, the forum noted that Pakistan’s heavy reliance on imported fossil fuels has left the economy acutely vulnerable to external shocks.

The blockade of the Strait of Hormuz has underscored this fragility, with Pakistan dependent on the Gulf for nearly 70% of its oil supplies and lacking meaningful strategic reserves.

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Dr. Nafisa Shah, Member of the National Assembly and Co‑Convenor of the Parliamentary Forum on Energy and Economy, said the current crisis is not merely an external shock but the cumulative result of decades of policy failures.

“This moment demands a clear choice between drifting from one fossil‑fuel emergency to the next, or committing to an energy transition built on sovereignty, resilience, and justice,” she said, adding that Pakistan must stop relying on external shocks and temporary fixes.

“Building a just, resilient, and sovereign energy system is now a national imperative.”

Barrister Danyal Chaudhry, Parliamentary Secretary for Information and Broadcasting, stressed the importance of public trust.

“Citizens deserve clear and honest communication about fuel prices, reforms, and IMF commitments. Opacity during economic stress only deepens anxiety and erodes confidence in institutions.”

Sher Ali Arbab, Member of the National Assembly and Co‑Convenor of the Forum, welcome all inputs and said a comprehensive report would be sent to the government.

He cautioned that the government’s approach risks weakening economic recovery.

“Energy price increases should have tracked global prices. Instead, the crisis is being used to raise revenue through the PDL at a time when the economy can least absorb the shock,” he said, warning that reduced fuel consumption and slowing growth would ultimately defeat revenue objectives.

The briefing highlighted that domestic fuel prices have risen by more than 50% from pre‑crisis levels, at one point crossing Rs458 per litre.

Experts noted that while global oil price volatility played a role, the sharp escalation was driven primarily by repeated increases in the PDL, which has climbed to approximately Rs117.41 per litre.

Panelists stressed that the PDL has increasingly been used as a fiscal instrument to manage the budget deficit. For instance, economist Asad Saeed stated that Unlike the General Sales Tax (GST), whose proceeds are shared with provinces under the National Finance Commission Award, the PDL is classified as non‑tax revenue, allowing the federal government to retain 100% of collections.

This, experts argued, undermines fiscal federalism and deprives provinces of critical resources.

Muhammad Badar Alam, CEO of the Policy Research Institute for Equitable Development (PRIED), described the levy as inherently regressive.

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“The PDL is applied uniformly regardless of income, meaning low‑income households bear a far heavier burden than high‑income consumers. It also allows the federal government to bypass principles of fiscal sharing with the federating units.”

Parliamentarian Khursheed Junejo PPP MNA talked about the overwhelming impact of raised petrol and diesel prices on agriculture particularly the price of fertiliser and also tractors.

“We are not cultivating our lands, we are leaving them”, he said.

Oil and gas consultant Sikandar Memon emphasised that security cannot rely on imports alone. Emphasising use of existing infrastructure and optimising existing resources, he argued that Pakistan must build a resilient and diversified energy mix and an architecture for protection against volatile pricing.

Dr Khaqan Hassan Najeeb, former Advisor to the Ministry of Finance, said energy insecurity has become macroeconomic insecurity.

“The country must move away from an imported‑energy survival model towards indigenous, integrated, and resilient energy solutions, arguing for shifting goods transport to railways freight,” he said.