Islamabad – Pakistan has prioritized increasing petroleum revenue over providing direct relief to the public, as the government continues to raise the petroleum levy (PL) on key fuels.
The federal government aims to generate additional revenue from March 15 to 31 by increasing the petroleum levy on petrol and high-speed diesel (HSD) by Rs10 per litre. This adjustment raises the PL from Rs60 to Rs70 per litre, impacting consumers across the country.
According to sources within the Petroleum Division, the petroleum levy has already contributed Rs718 billion in the first eight months of the ongoing fiscal year (July-February 2024-25). This collection is moving towards the annual target of Rs1.28 trillion, underscoring the government’s reliance on petroleum taxation as a major revenue stream.
On Saturday, Prime Minister Shehbaz Sharif announced that existing petroleum prices would remain unchanged for the current fortnight. However, instead of direct fuel price reductions, the government has decided to provide relief through lower electricity bills. Despite the increase in petroleum levy, this approach aims to balance revenue generation with consumer relief measures.
Petroleum product sales have witnessed a 4.0% increase year-over-year, reaching 10.55 million tonnes in the first eight months, compared to 10.18 million tonnes in the same period last year. This rise in demand suggests continued reliance on petroleum products despite fluctuating global oil prices.
The government has revised the petroleum levy on multiple fuels, increasing the PL rate on both petrol and HSD by Rs10 per litre. The levy on kerosene oil has been raised by Rs10.96 per litre, light diesel oil (LDO) by Rs7.75 per litre, and high-octane blending component (HOBC) by Rs50 per litre. These hikes are expected to contribute significantly to revenue collection.
According to official documents, the expected increase in the ex-refinery price of petrol was Rs9.53 per litre following a reduction in the average Platts price, with incidentals and duties decreasing by Rs12.71 per litre from Rs173.33 to Rs160.61 per litre. Additionally, the Pakistan State Oil (PSO) exchange rate adjustment levy stands at Rs3.18 per litre.
The Inland Freight Equalization Margin (IFEM) has been reduced by 46 paisa, lowering it from Rs5.79 to Rs5.33 per litre on petrol.
For HSD, ex-refinery prices have been reduced by Rs9.17 per litre, from Rs178.90 to Rs169.73 per litre. This includes a reduction in the average Platts price with incidentals and duties by Rs9.36 per litre, from Rs177.56 to Rs168.20 per litre, alongside a PSO exchange rate increase of 19 paisa, from Rs1.34 to Rs1.53 per litre. The IFEM has been adjusted downward by 62 paisa, reducing it from Rs2.92 to Rs2.30 per litre.
While the government’s focus remains on boosting petroleum revenues, the public awaits measures that could ease the financial burden caused by high fuel prices. The impact of these adjustments will be closely monitored in the coming weeks.