Islamabad: The federal government is set to generate an additional Rs90 billion in revenue during the final three and a half months of the current fiscal year by significantly raising the petroleum levy on key fuel products.
Since March 16, 2025, the levy on petrol has been increased by Rs18.02, jumping from Rs60 to Rs78.02 per litre. Similarly, the levy on high-speed diesel (HSD) was raised by Rs17.01 per litre, taking it from Rs60 to Rs77.01 per litre.
This upward revision in the petroleum levy is expected to provide a much-needed fiscal cushion to the government. Projections suggest that, if sustained over a full year, the revised rates could yield as much as Rs300 billion in additional revenue.
Initially, the petroleum levy had a statutory cap of Rs60 per litre. However, this was increased to Rs70 per litre in the current federal budget. More recently, the issuance of a presidential ordinance has effectively removed any ceiling on the levy, giving the government flexibility to adjust rates without legislative approval.
Despite the increase in levy, consumers saw a marginal drop in fuel prices in the fortnight beginning May 1, 2025. This was made possible by adjustments in refinery margins and the reduction of the controversial Inland Freight Equalization Margin (IFEM). The IFEM on petrol was reduced by 59 paisa, bringing it down from Rs6.89 to Rs6.30 per litre. On HSD, the margin was cut by 26 paisa—from Rs3.59 to Rs3.33 per litre.
The petroleum levy remained unchanged during the previous pricing cycle ending April 30, 2025, with petrol and HSD carrying levies of Rs78.02 and Rs77.01 per litre, respectively. Importantly, the government continues to charge zero general sales tax (GST) on petroleum products, relying instead on the enhanced levy as its main tool for revenue generation in the oil sector.
By leveraging the flexibility of the petroleum levy, the government aims to balance fiscal requirements while managing retail fuel prices through other mechanisms.