Islamabad, November 2, 2024 – Pakistan’s petroleum levy collection has recorded a robust surge, reaching Rs 262 billion in the first quarter of the fiscal year 2024-25, according to a report released by the Ministry of Finance.
This figure marks an 18% increase compared to the Rs 222 billion collected during the same period in the previous fiscal year, underscoring the government’s intensified efforts to bolster non-tax revenue streams.
The petroleum levy, a critical source of non-tax revenue, plays a pivotal role in funding the government’s fiscal objectives. Last year, the levy generated Rs 1.02 trillion, and for FY2024-25, the government has ambitiously set a target of Rs 1.28 trillion. This increase aligns with fiscal strategies laid out in the Finance Act 2024, which raised the per-liter petroleum levy on high-speed diesel oil and petrol from Rs 60 to Rs 70.
In addition to levies on petrol and diesel, the government accrued Rs 7.78 billion from the windfall levy on crude oil during the first quarter. This levy, applied to profits from significant increases in crude oil prices, reflects the government’s responsiveness to market dynamics and its commitment to capturing revenue from energy-related sectors. Furthermore, the natural gas development surcharge contributed Rs 11.72 billion from July to September, underscoring the government’s diversification of revenue channels within the energy sector.
The increase in petroleum levies forms part of a broader fiscal strategy aimed at reducing reliance on external debt and strengthening domestic revenue generation. As global petroleum prices fluctuate and Pakistan’s economy continues to recover, petroleum levies have emerged as a stable revenue source, allowing the government to balance public spending and reduce budget deficits. However, these levies are also subject to inflationary pressures, potentially impacting consumer prices and driving up the cost of fuel and transportation.
Analysts point to the sustained rise in the petroleum levy as a double-edged sword. While it bolsters government revenues, the increased levy on petroleum products places additional financial strain on consumers amid an environment of high inflation. With the government’s revenue target still ambitious, any deviation in global oil prices or domestic consumption patterns may necessitate further adjustments in levy rates, impacting the overall fiscal framework.
The government’s strategy to generate over a trillion rupees in petroleum levies this fiscal year reflects a delicate balancing act—one that must weigh revenue collection goals against the public’s tolerance for higher energy prices. As Pakistan’s fiscal year progresses, the petroleum levy will continue to be a vital metric in assessing the resilience of the government’s fiscal policies and its capacity to achieve financial stability amid economic challenges.