Pakistan's rare fiscal surplus driven partly by petrol levy collection

A year after undergoing one of its worst economic crises, Pakistan reported a fiscal surplus in the first quarter of a fiscal year for the first time ever. While, the credit largely goes to the profits made by the State Bank of Pakistan (SBP), there is another element to the feat — the petroleum development levy (PDL) collection.

Last year, the country collected PDL amounting to PKR 262 billion, showing a rise of 18% over the same period last year.

According to data from the Ministry of Finance, the second-highest collection of non-tax revenue arrived from petroleum development levy during the first quarter of the current fiscal year.

Total collection under the account of non-tax revenue was PKR 3,061 billion, of which nearly PKR 2,500 billion arrived from State Bank of Pakistan profit as against PKR 972 billion profit earned a year ago.

The collection from petroleum development levy in the first quarter of FY25 amounted to PKR 262 billion, up from PKR 222 billion during the same period a year ago.

In the financial year ended June 30, net collection from petroleum development levy was around PKR 1,019 billion compared to PKR 580 billion of the corresponding year.

The government plans to raise petroleum levy to PKR 70 per liter in FY25 but has so far failed to create room to increase it. Currently, the government has been charging PKR 60 per liter as tax while collecting another PKR 22 to PKR 23 as the customs duty on every liter of petroleum products.

The government has set a target of PKR 1.28 trillion in tax collection for FY25, which appears to be quite a herculean task as per the current trend of oil consumption in the country.

In the first quarter ended September 30, oil consumption fell by 3% to 3.68 million tons whereas diesel sales dropped by 1% to 1.42 million tons while petrol consumption remained unchanged at 1.85 million tons. The furnace oil consumption declined by 39% to 210,000 tons.

Furnace consumption in the country has been on the decline for more than two years as the government has switched to cheaper modes compared to furnace oil like RLNG, hydel coal and nuclear run power generation plants.