Rs2.50 per litre carbon levy on POL products likely

ISLAMABAD: The Petroleum Division (PD) has sent a summary to the Cabinet Committee for Disposal of Legislative Cases (CCLC), seeking carbon levy of Rs2.50 per litre on petrol, diesel and furnace oil by June end for budgetary year FY26. The carbon levy will be hiked to Rs5 per litre on POL products in FY27.

The levy is being imposed in line with the IMF diktat, as the Fund has extended $1.3 billion to Pakistan in the head of Resilience and Sustainability Facility (RSF) to cope with challenges of climate changes. The Petroleum Act will be amended to impose carbon levy on petrol, high speed diesel and furnace oil.

Officials privy to the development said Rs2.50 carbon levy on three POL products would help fetch Rs6-7 billion per month. When hiked to Rs5, the revenue will soar to Rs12-14 billion per month. The revenue may also be used for significant reduction of C02 emissions by creating efficient incentives for the uptake and use of electric vehicles. It will contribute to the goal of 30pc penetration of new passenger EV sales and 50pc for 2-3 wheelers by 2030 and reducing balance of payment stability risks by shifting away from imported fuel products.

The Petroleum Levy (PL) was earlier increased by Rs10 per litre from Rs60 to Rs70 mainly to reduce power tariff by Rs2.12 per unit for three months. Government again increased the PL on petrol and diesel to Rs78.02 and Rs77.01 per litre.

Now, the end consumers of petroleum products (MS, HSD and FO) will pay Rs2.50-5 per litre as carbon levy. Earlier, the ECC meeting also increased the cap or ceiling of PL up to Rs90 per litre. It currently stands at Rs78.02 on petrol and Rs77.01 on HSD.

The government has already increased Internal Freight Equalisation Margin (IFEM) by Rs1.87 per litre on petrol and diesel to accommodate the refineries and OMCs. They faced a loss of Rs34 billion in the current financial year because of sales tax exemption on POL products.

The Oil Marketing Companies (OMCs) margin of Rs1.12 per litre and dealers margin of Rs1.12 are yet to be decided by the prime minister.