Pakistan's petroleum levy hike may push fuel prices up 17% in FY26

The Pakistan government expects to raise PKR 1,311 billion through the petroleum development levy (PDL) in the next fiscal year, an increase of PKR 194 billion compared to the current year, which could drive up petrol and diesel prices by an average of 17%, according to analysts.

A source at the Ministry of Finance said the projected levy collection for fiscal year 2025–26 represents a sharp rise from the estimated PKR 1,117 billion expected to be collected during the current fiscal year.

“The increase in PDL by PKR 194 billion suggests that, if all other variables remain constant — including the exchange rate, global oil prices, and domestic consumption — average prices of petroleum products could rise 17%,” said a leading analyst.

According to documents from the Ministry of Petroleum, PDL collection for the first nine months of FY25 stood at PKR 834 billion. With an average monthly collection of PKR 92.6 billion, full-year collections are expected to reach PKR 1,112 billion — slightly short of the PKR 1,117 billion target outlined in the International Monetary Fund (IMF) projections.

Analysts believe the revenue shortfall can be offset if the government increases the levy component on petroleum products or if fuel consumption rises in line with economic growth. The government has projected GDP growth of 4.4% in FY26, up from an estimated 2.6% in FY25.

The PDL on petrol and diesel was increased via Presidential Ordinance on March 16. As of March 1, the PDL on both fuels stood at PKR 60 per liter. It has since been raised to PKR 78 per liter. Similarly, the levy on high-octane blending component (HOBC) was raised from PKR 50 to PKR 77 per liter.

The Presidential Ordinance allows the government to raise the PDL without seeking approval from the National Assembly. Analysts expect this provision to be formalized in the upcoming federal budget for FY26 through the Finance Bill, which would permit future PDL increases without parliamentary consent.