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The federal government has generated Rs220 billion through the petroleum levy during July and August of fiscal year 2026-27, while discussions are underway with Jamaat-e-Islami (JI) over proposals to reduce the financial burden on fuel consumers.
According to a report published in The News, the government’s current budgetary framework, agreed with the International Monetary Fund (IMF) under its $7 billion Extended Fund Facility (EFF), provides little fiscal space for reducing the levy at this stage.
It remains unclear how the government will respond to Jamaat-e-Islami’s demand for rationalising the petroleum levy, particularly as rising fuel costs continue to put pressure on household budgets.
Higher petrol and diesel prices have also contributed to inflation, with the Consumer Price Index (CPI) inflation rate remaining close to double digits during the current fiscal year.
Petroleum Levy Target Increased to Rs1.676 Trillion
Official figures show that the government has set a petroleum levy collection target of Rs1.676 trillion for fiscal year 2026-27.
This is higher than the initial budget estimate of Rs1.468 trillion for the previous fiscal year.
However, actual petroleum levy collections during 2025-26 exceeded the original target by nearly Rs100 billion, reaching Rs1.567 trillion by June 30, 2026.
Under the current budget, the government aims to increase collections by another Rs109 billion, taking the total to Rs1.676 trillion by June 30, 2027.
The federal government is currently charging Rs80 per litre as petroleum levy on both petrol and diesel.
Parliament has empowered the federal government to adjust the levy, allowing it to increase the rate without seeking additional parliamentary approval.
Carbon Levy Generates Rs27.5 Billion
Apart from the petroleum levy, the government has also collected substantial revenue through other fuel-related charges.
The Climate Support Levy, also known as the Carbon Levy, generated Rs27.5 billion during the first two months of the current fiscal year.
The government has set a collection target of Rs50 billion under this category for 2026-27, broadly in line with the Rs50.159 billion collected during the previous fiscal year.
NEV Levy Collection Reaches Rs7.2 Billion
The New Energy Vehicle (NEV) Adoption Levy generated Rs7.225 billion during July and August.
The government has set a revenue target of Rs22.481 billion from this levy for the current fiscal year, compared with the previous year’s budgeted estimate of Rs10 billion.
The growing revenue collection from petroleum-related taxes and levies highlights the government’s reliance on fuel-based taxation to meet its fiscal targets.
However, pressure is mounting on the government to provide relief to consumers facing high fuel prices and inflation.
The key challenge for policymakers will be balancing public demands for lower fuel costs with revenue commitments made under the IMF programme.
