Federal Board of Revenue and the federal government have significantly increased the tax burden on petroleum products, pushing the total tax component on petrol to Rs. 117.41 per liter — nearly 50 percent higher than the Rs. 78 per liter recorded in May 2025.
According to official figures, the Petroleum Development Levy (PDL) on petrol was raised by Rs. 13.91 per liter, increasing from Rs. 103.50 to a historic high. A similar increase was implemented on high-speed diesel, where the levy climbed to Rs. 42.60 per liter from Rs. 28.69 per liter.
Under the latest fuel price notification effective from May 9, 2026, petrol prices surged by Rs. 14.92 per liter to Rs. 414.78, while high-speed diesel prices increased by Rs. 15 per liter to Rs. 414.58.
Despite the sharp increase in domestic fuel prices, international petroleum prices remained largely stable during the week. Based on global market benchmarks, the ex-tax price of petrol remained close to Rs. 268 per liter, indicating that the majority of the increase came from higher petroleum levies imposed by the government.
For diesel, global price movements suggested an increase of around Rs. 7.5 per liter, but consumers are now paying almost double that amount at fuel stations across Pakistan.
The widening difference between international fuel costs and local retail prices highlights the government’s growing dependence on petroleum levies as a major revenue-generating tool amid fiscal pressures.
Economic analysts believe the latest increase may also be linked to commitments tied to the recently approved $1.3 billion loan package from the International Monetary Fund (IMF). The IMF executive board approved the funding shortly before the revised fuel prices were announced.
The FBR is currently facing a major revenue shortfall exceeding Rs. 600 billion during the ongoing fiscal year. Analysts suggest higher petroleum levy collections could help the government bridge the fiscal gap and meet IMF-related revenue targets.
The continued rise in fuel taxation has pushed Pakistan among the region’s most expensive fuel markets relative to average household incomes, even though international crude oil prices have shown limited volatility in recent weeks.
Public reaction on social media has been strong, with many consumers criticizing the government for increasing fuel prices despite stable international oil rates.
Economists warn that persistently high fuel prices are likely to fuel inflation further by increasing transportation costs, food prices, and household expenses, adding additional pressure on citizens already struggling with rising electricity tariffs and overall living costs.
However, the federal government has not officially confirmed any direct link between the latest petroleum levy increase and ongoing revenue shortfalls.
