Pakistani citizens are likely to face a significant increase in fuel prices in the upcoming fiscal year 2025-26, as the government plans to collect an additional Rs. 194 billion through the petroleum levy. This move is part of the government’s commitment to the International Monetary Fund (IMF), according to sources familiar with the matter.
For the fiscal year 2025-26, the estimated target for petroleum levy collection has been set at a staggering Rs. 1,311 billion. This represents a substantial increase from the current fiscal year’s target of Rs. 1,117 billion. The additional burden, if implemented, will directly impact consumers through higher prices for petrol and diesel.
Sources reveal that from July to March of the current fiscal year, petroleum levy collections stood at Rs. 833.847 billion. In the previous fiscal year (2023-24), total petroleum levy collection amounted to Rs. 1,019 billion, while in FY 2022-23, it was Rs. 580 billion. The projected collection for FY 2025-26 will mark the highest ever petroleum levy collection in Pakistan’s history.
Currently, the petroleum levy on petrol and diesel is already at an all-time high in Pakistan. Consumers are paying Rs. 78.02 per liter as petroleum levy on petrol and Rs. 77.01 per liter on high-speed diesel. This new increase, once imposed, will further add to the financial strain on citizens already contending with high inflation.
Oil Sector Demands Margin Increase Amidst Rising Costs
Adding to the complexities, the oil sector has demanded a Rs. 10 per litre margin for oil marketing companies (OMCs), representing a 27 percent increase from the current rate of Rs. 7.87 per litre.
In a letter addressed to the Minister for Petroleum, the Oil Companies Advisory Council (OCAC) reminded the government that in June 2024, the industry had initially recommended a higher margin of Rs. 12.65 per litre. This recommendation was based on escalating cost pressures, including financing expenses for maintaining 20 days of stock, turnover tax, handling losses, demurrage charges, unadjusted GST up to June 2024, and other operational expenses.
Following discussions with the Petroleum Division and the Oil and Gas Regulatory Authority (OGRA), the industry revised its request. It now seeks a margin of Rs. 10 per litre and the recovery of demurrage and unadjusted GST costs through the Inland Freight Equalisation Margin (IFEM).
The council noted that while the Economic Coordination Committee (ECC) had approved GST recovery through IFEM, the crucial margin revision was not considered. The OCAC has urgently requested the minister to approve the revised rate immediately to prevent further financial damage to the oil marketing companies.
Furthermore, the council strongly urged that the GST exemption, pertaining to certain operations, be formally included in the Finance Bill 2025. It stated that both the margin revision and formal exemption are essential for ensuring financial stability in the downstream petroleum sector and guaranteeing an uninterrupted fuel supply nationwide. The impending budget is expected to bring clarity on these critical proposals impacting both consumers and the oil industry.
