Consumers in Pakistan are bracing for a potential increase in petrol prices as the federal government reportedly plans to introduce a carbon levy of Rs 2.5 per litre on petroleum products in the upcoming Budget 2025-26. This new tax, aimed at generating revenue and promoting green initiatives, is expected to add to the existing financial burden on citizens.
Sources indicate that the carbon levy will be imposed on petrol and high-speed diesel, alongside the already applicable Petroleum Development Levy (PDL). Kerosene and light diesel oil are expected to be exempt from this new charge. While the initial levy is proposed at Rs 2.5 per litre, there are plans to potentially increase it to Rs 5 per litre in the subsequent fiscal year (2026-27).
The government anticipates generating approximately Rs 45 billion from this carbon levy in the fiscal year 2025-26, with projections suggesting this amount could double by 2027. The revenue collected from this levy is reportedly earmarked for “green budgeting” initiatives, aligning with the country’s environmental protection goals.
This move comes as the government concludes budget negotiations with the International Monetary Fund (IMF), which has reportedly pushed for such fiscal measures to stabilize the economy and support Pakistan’s transition towards cleaner energy. The IMF has also suggested redirecting generated revenue to subsidize electric motorcycles and rickshaws, encouraging the adoption of electric vehicles.
While the government aims to meet fiscal targets and address climate change concerns, the proposed carbon levy is likely to trigger an increase in fuel prices, further impacting household budgets and transportation costs across the country. Consumers are advised to monitor official announcements regarding the budget and fuel price adjustments in the coming weeks.
