Islamabad, May 20, 2025 — In a move set to impact fuel prices nationwide, Pakistan is preparing to hike the petroleum levy to Rs100 per liter starting July 2025, according to a report published by The News.
The planned increase comes under a new agreement with the International Monetary Fund (IMF), aiming to boost government revenues and support the energy sector, particularly by reducing the ballooning circular debt.
While the government continues to exempt the sales tax on the supply of petroleum products to ease pressure on consumers, the rising levy is creating a financial strain for the public. Currently, the petroleum development levy (PDL) stands at Rs78 per liter on petrol and Rs77 per liter on diesel. The proposed adjustment will push the levy beyond Rs100 per liter, a substantial jump intended to generate non-tax revenue in line with IMF conditions under the Extended Fund Facility (EFF).
A senior finance ministry official quoted in the report noted that this strategy is central to Pakistan’s broader efforts to stabilize its fiscal framework. The increased levy will help finance power sector subsidies, particularly those related to electric vehicles and climate-linked infrastructure. Since July 2024, the PDL has already risen significantly—from Rs60 to Rs80 per liter—resulting in over Rs1 trillion in revenue during the first ten months of the outgoing fiscal year. The government’s target for the full year is Rs1.281 trillion through the levy alone.
In line with climate-oriented fiscal measures, Pakistan also plans to introduce a new carbon levy of Rs5 per liter on both petrol and diesel. This is seen as part of the government’s commitment to green economic reforms and environmental sustainability.
In the power sector, key reforms include the removal of a 10% cap on the Debt Service Surcharge (DSS) on electricity bills by the end of June 2025. The government is also finalizing a new Circular Debt Management Plan, expected to be approved by cabinet before July. Regular tariff adjustments and fuel cost pass-through mechanisms will remain in place to support these objectives.
With all provinces agreeing not to introduce new power or gas subsidies, Pakistan aims to ensure long-term sustainability in both its fiscal and energy frameworks. The IMF, in its recent remarks, acknowledged that these steps have started to reduce circular debt, but emphasized that reform momentum must continue to safeguard Pakistan’s energy sector and economic future.