The federal government will impose a Rs77 per litre petroleum levy and Rs5 per litre carbon levy on petrol, diesel, and furnace oil from July 1, 2025. This decision is part of Pakistan’s agreement with the International Monetary Fund (IMF) under the Resilience and Sustainability Facility (RSF) to promote climate resilience and stabilize the economy.
The Ministry of Energy (Petroleum Division) submitted a formal summary to the federal cabinet, requesting urgent approval. These levies are to be legislated through the Finance Bill 2025-26, which must be passed by June 30 to meet IMF conditions. The finance minister had already hinted at these changes during the budget speech.
The carbon levy will initially be Rs2.5 per litre on petrol, diesel, and furnace oil in the next fiscal year. It will rise to Rs5 per litre in FY27. Additionally, the Rs77 petroleum levy will fully apply from July 1, 2025, after amendments to the Petroleum Levy Ordinance 1961 are approved.
In return, the IMF has approved $1.4 billion in new funding, along with a $7 billion extension to Pakistan’s current Extended Fund Facility. These reforms are expected to strengthen public investment systems and reduce climate-related economic vulnerabilities.
However, oil industry stakeholders strongly oppose the levies. They warn that local sales of furnace oil may stop, reducing sales tax revenues. They also criticized the government for failing to remove tax exemptions, which it had promised to refineries and marketing companies in earlier budget talks.