ISLAMABAD: The government is set to impose Petroleum Levy (PL) of Rs 77 per litre (Rs 82,077 per metric ton) on furnace oil starting July 1, 2025, following the enactment of amendments to the Petroleum Levy Ordinance, 1961 through the Finance Act 2025-26.
According to the Petroleum Division, this move is part of Pakistan’s ongoing commitments under the IMF’s Resilience and Sustainability Facility (RSF) programme. The government has agreed to introduce a Carbon Levy on petrol, diesel, and furnace oil, along with a Petroleum Levy specifically on furnace oil, as part of broader fiscal and environmental reforms.
A relevant extract from the agreement states: “RM 3 (end-June 2025) Carbon Levy: This will include a supplementary carbon levy imposed through the PDL (Petroleum Development Levy) on gasoline and diesel at PRs 5 per litre, phased in over two years. As part of this reform, fuel oil will be added to the PDL, with both base and supplementary rates applicable.
Petrol, HSD and furnace oil: Rs2.5/litre carbon levy imposed
The scope, phasing, and level of the supplementary carbon levy will be legislated through the FY26 Finance Act. Future Finance Acts may increase the carbon levy beyond this initial rate as needed.“
As per the proposed amendments (Annex-I) included in the draft Finance Bill 2025-26: A Carbon Levy of Rs 2.5 per litre will be imposed on motor spirit (petrol) and high-speed diesel for FY 2025-26, which will be increased to Rs 5 per litre in FY 2026-27.
On furnace oil, a Carbon Levy of Rs 2.5 per litre (Rs 2,665/MT) will apply in FY 2025-26, rising to Rs 5 per litre in FY 2026-27, in addition to the Petroleum Levy of Rs 77 per litre (as agreed with the IMF).
The Petroleum Division has confirmed that these rates were agreed during discussions with the IMF and will take effect once the Finance Act is enacted.
Under the amended Petroleum Levy Ordinance, 1961, the federal government is authorized to determine and notify applicable PL rates.
The proposals for both the Carbon Levy and the Petroleum Levy—as outlined in paragraphs 2 and 3 of the summary—are being submitted to the Federal Cabinet for formal consideration and approval.
It was also noted that the Finance Division and Petroleum Division jointly finalized the principles and rates of the levies with the IMF, and thus, the summary has not been circulated for formal comments from the Finance Division.
Copyright Business Recorder, 2025
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