The Ministry of Energy (Petroleum Division) has proposed amendments to the Petroleum Products (Petroleum Levy) Ordinance, 1961, to introduce new levies on fuel, specifically Carbon Levy and Petroleum Levy (PL) on furnace oil, petrol, and diesel.
As per the summary prepared by the ministry for the consideration of the cabinet, under the ongoing International Monetary Fund (IMF) programme for Resilience and Sustainability Financing (RSF), the government has agreed for imposition of Carbon Levy on petrol, diesel and furnace oil along with imposition of Petroleum Levy (PL) on furnace oil.
“This will include supplementary carbon levy levied through the PDL on gasoline and diesel of Rs5 per liter, which will be phased in over two years. As part of this reform, fuel oil will be added to the PDL (PL), with the base and supplementary rate applicable to it.
“The scope, phasing and level of the supplementary carbon levy will be legislated through the FY26 Finance Act. Future Finance Acts will be able to raise the carbon levy beyond this initial rate as required.”
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The Ministry of Energy informed that the proposed amendments in the Petroleum Products (Petroleum Levy) Ordinance, 1961, have been incorporated in the draft Finance Bill 2025-26.
“The draft amendments, inter-alia, provide that there shall be levied Carbon Levy at the rate of Rs.2.5/litre on Motor Spirit and High Speed Diesel for FY 2025-26, which shall be enhanced to Rs5/litre for FY 2026-27.
“The Carbon Levy on Furnace Oil shall be levied at the rate of Rs2.5/litre (Rs2,665/MT) for FY 2025-26, which shall be enhanced to Rs5/litre for FY 2026-27 in addition to the Petroleum Levy at the rate notified by the Federal Government.”
As per the summary, during the government’s negotiations with the IMF, it has been agreed that the Petroleum Levy at the rate of Rs77/liter (Rs82,077/MT) will be imposed on Furnace Oil w.e.f 1st July 2025, upon enactment of the amendments in the PL Ordinance 1961 through Finance Act 2025-26.
It shared that under the amended PL Ordinance, 1961, the federal government has been authorised to determine and notify the rates of Petroleum Levy.
“Accordingly, proposals for imposition of Carbon Levy and Petroleum Levy at the rate as specified are submitted for consideration and approval of the Cabinet,” read the summary.
It shared that the principles and rates for imposition of both Carbon Levy and PDL have been finalised with the IMF, both by the Finance Division and the Petroleum Division jointly.
