Government raises levy on diesel and petrol by PKR 10/liter

The Pakistan government, taking advantage of falling international prices, has increased the petroleum development levy while keeping fuel prices unchanged for the next fortnight, despite calculations suggesting a cut in petroleum product prices.

The levy has been raised to PKR 70 per liter from PKR 60 per liter, absorbing the potential reduction in petroleum product prices.

Estimates prior to the announcement indicated that petrol prices were expected to drop by PKR 14 per liter and diesel by PKR 10 per liter.

During the announcement of the federal budget for the current fiscal year, the government approved the increase in the petroleum development levy to PKR 70 per liter. This is one of the conditions of IMF for the $7 billion extended fund facility.

This tax hike is expected to improve revenue collection from this source.

As a result, petrol prices remain at PKR 255.63 per liter, while diesel is priced at PKR 258.64 per liter.

It is projected that during the first eight months of the current fiscal year, the petroleum development levy collection will amount to approximately PKR 718 billion, averaging PKR 90 billion per month, based on the previous levy of PKR 60 per liter.

With the increase to PKR 70 per liter, monthly collections are expected to rise by PKR 4 billion, bringing the total to around PKR 18 billion over the next three and a half months.

With a projected 3% increase in petroleum product sales over the next four months, the total petroleum development levy collection is expected to reach PKR 1,140 billion, compared to the FY25 target of PKR 1,281 billion, according to an analyst.

Prime Minister Shehbaz Sharif announced that while petroleum product prices for the fortnight would remain unchanged, the public would benefit from reduced electricity tariffs.

In a recent meeting with a group of businessmen, the prime minister assured them that the government is working to lower electricity tariffs to make Pakistani products more competitive in the global market, boost exports, and curb inflation.

The prime minister has directed the relevant ministry to provide relief not only to the industry but also to the general public.

The International Monetary Fund (IMF) has already eased pressure on the government by allowing a reduction in the revenue collection target for the full fiscal year.

The target has been lowered to PKR 12.35 trillion from PKR 12.97 trillion, a decrease of PKR 620 billion.
In the first eight months of the current fiscal year, revenue collection fell short by PKR 606 billion.