The Senate Standing Committee on Finance has rejected the government’s proposal to impose a Rs2.5 per litre carbon levy on fuel. This proposed levy, part of the federal budget, was expected to generate Rs48 billion to fund green energy projects. However, committee members expressed serious concerns over rising inflation and fuel prices already burdening the public.
Finance Ministry officials shared that the levy would apply to petrol, high-speed diesel, and furnace oil. It was planned to gradually increase to Rs5 per litre by the fiscal year 2026–27. However, during the committee’s recent budget discussions, a majority of members opposed it. Lawmakers argued that such a measure, though well-intentioned, would further strain low and middle-income families already struggling with rising living costs.
The levy was originally introduced by Finance Minister Muhammad Aurangzeb as a dual-purpose tool. The government aimed to diversify revenue streams and push the country toward cleaner energy alternatives. The funds collected would be invested in renewable technologies such as solar power, wind energy, and hybrid systems to reduce dependence on fossil fuels.
Supporters of the proposal within the ministry had also pointed out that Pakistan’s import bill, largely made up of oil and gas, could be reduced through such measures. They argued that lowering fossil fuel use would not only help energy security but also align Pakistan with international climate goals, including commitments made under the Paris Agreement.
But the rejection now puts the future of the levy in doubt. The Finance Ministry may consider revising or postponing the plan before finalizing the budget. The setback adds to the government’s list of challenges, including balancing economic reforms with inflation control and gaining public support for long-term fiscal strategies.