In a bid to generate non-tax revenue, Pakistan has recently announced an increase in the petroleum levy, raising it to Rs60 per liter.
The decision was approved by the national assembly through an amendment to the Petroleum Products (Petroleum Levy) Ordinance of 1961, which raised the levy from Rs50 to Rs60 per liter.
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The enhanced levy will be applied to the prices of high-speed diesel (HSD) and motor spirit (petrol), and it is expected to take effect from July 01, 2023. The government may choose to implement the increase in phases or all at once.
However, this decision will likely result in a hike in petroleum prices within the country, as the increased levy will be passed on to the masses. Consequently, this move is expected to add further inflationary pressure on the economy.
According to budget documents, Pakistan has set an ambitious target of generating approximately Rs870 billion through the petroleum levy in the fiscal year 2023-24. This goal highlights the government’s determination to bolster revenue, despite facing challenges in the petroleum sector.
During the outgoing fiscal year 2022-2023, the government initially aimed to collect Rs855 billion through the petroleum levy. However, this figure was later revised downward to Rs542 billion. As a result, the government now faces the challenge of collecting an additional Rs328 billion in the next fiscal year to reach its ambitious revenue target.
One noteworthy aspect of this plan is the government’s decision to increase petroleum prices in the upcoming fiscal year, even as the country benefits from affordable oil imports from Russia and falling international prices. This decision demonstrates the government’s intention to leverage the petroleum sector as a means of generating the necessary funds, despite external factors suggesting otherwise.
While the increase in petroleum levy may provide a boost to the government’s revenue generation efforts, it is important to consider the potential impact on the general population. The rise in petroleum prices could have cascading effects on various sectors of the economy, leading to increased transportation costs, higher prices of essential commodities, and ultimately, a burden on the average consumer.
It remains to be seen how the implementation of the increased petroleum levy will unfold and how it will affect the overall economic landscape in Pakistan. The government’s ambitious revenue target indicates a commitment to finding innovative solutions amidst the challenges faced by the petroleum sector. However, striking a balance between revenue generation and the well-being of the populace will be crucial in ensuring sustainable economic growth.
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