ISLAMABAD: The federal government has set an ambitious target of Rs1.677 trillion in Petroleum Levy (PL) collections on petroleum products for FY2026-27, marking an increase of nearly 11.8 percent or Rs178.5 billion over the revised estimate of Rs1.498 trillion for the outgoing fiscal year.
Energy sector experts believe the government may further increase the petroleum levy to as much as Rs100 per litre, following the removal of the statutory cap through amendments to the Petroleum Levy Ordinance.
Successive governments have increasingly relied on petroleum levy revenues as they are not part of the Federal Divisible Pool (FDP) and therefore do not have to be shared with provinces under the National Finance Commission (NFC) award.
Climate Support Levy to Double
The budget also projects Rs50 billion in revenue from the Climate Support Levy (CSL), up from the revised estimate of Rs48 billion for FY2025-26.
Currently, consumers pay Rs2.50 per litre under the CSL. In line with commitments made to the International Monetary Fund (IMF), the levy is expected to increase to Rs5 per litre during the next fiscal year.
Captive Power Levy Target Revised
The government has budgeted Rs15.736 billion from the levy on Off-the-Grid (Captive Power Plants) for FY2026-27, compared to a revised target of Rs14 billion in the current fiscal year.
The original target for FY2025-26 was Rs105 billion, but collections remained below expectations as a large number of industries shifted back to the national power grid.
Under the Off-the-Grid (Captive Power Plants) Levy Act, the levy rate will increase gradually from 5 percent to 20 percent by August 2026.
GIDC Collection Target Increased
The government has projected Rs2.248 billion in collections from the Gas Infrastructure Development Cess (GIDC) next year, slightly higher than the revised estimate of Rs2 billion for the current fiscal year.
The GIDC was introduced to finance major gas and oil infrastructure projects. However, collections have remained below expectations due to prolonged legal disputes and stay orders obtained by industrial consumers.
In 2020, the Supreme Court directed various sectors to clear outstanding GIDC liabilities estimated at Rs407 billion, but significant recoveries remain pending.
Higher Revenue Expected from Gas Development Surcharge
Revenue from the Gas Development Surcharge (GDS)—the difference between prescribed and sale prices of natural gas that is transferred to provinces—is projected at Rs70.814 billion in FY2026-27.
This compares with a revised estimate of Rs63 billion and an original budget target of Rs49.437 billion for the outgoing fiscal year.
LPG Levy and Crude Oil Discount
The government expects to collect Rs3.455 billion through petroleum levy on Liquefied Petroleum Gas (LPG) next year, nearly unchanged from the revised estimate of Rs3.463 billion for FY2025-26.
Meanwhile, the budget provides for Rs20.5 billion to be retained through discounts on local crude oil prices, compared to the revised estimate of Rs19.488 billion this year.
Royalties and Windfall Levies
The FY2026-27 budget also proposes adjustments in royalties payable to provinces:
- Crude oil royalty: Rs45.504 billion
- Natural gas royalty: Rs95 billion
The government has also projected:
- Rs17 billion from windfall levy on crude oil.
- Rs1.127 billion from windfall levy on natural gas.
The budget reflects the government’s continued reliance on petroleum-sector revenues to support fiscal consolidation, with petroleum levy collections remaining one of the largest non-divisible sources of federal income in FY2026-27.
Story by Wasim Iqbal
