Pakistan government imposed a new tax on the sale of petrol, diesel and furnace oil namely “Carbon Levy” at Rs2.5 per litre to be collected in upcoming fiscal year 2025-26 that will be raised to Rs5 per litre in the financial year 2026-27, according to budget documents on Tuesday.
The new tax will be collected apparently with effect from July 1, 2025 in addition to the existing expensive petroleum development levy (PDL) at Rs78 per litre on petrol and Rs77 per litre on diesel, making the petroleum products further costlier.
While announcing the budget for 2025-26, Finance Minister Muhammad Aurangzeb also announced to collect Petroleum Levy on the sale of furnace oil (FO) at the rate to be notified by Federal Government from time to time.
While speaking at the National Assembly’s floor, Aurangzeb said that the Carbon Levy was being imposed to discourage more use of fossil fuel and to mobilise resources for climate change and green energy programmes.
Topline Securities commented “in line with commitment to IMF, the government has imposed PDL on furnace oil; however, the rate is not disclosed yet”.
Recent reports suggest the government would also surge PDL on the petroleum products to Rs100 per litre in the upcoming fiscal year (FY26) in line with new agreements with International Monetary Fund (IMF) under the ongoing 37-month long $7 billion Extended Fund Facility (EFF).
Key highlights of Pakistan budget for 2025-26
To recall, the diesel is being sold at Rs254.64 per litre and petrol at Rs253.63 per litre in Pakistan with effect from June 1. 2025. The government revises the petroleum products prices twice a month in line with global oil pricing trends.
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