How much do you pay in taxes per liter of fuel?

Starting April 16, the government of Pakistan raised the Petroleum Development Levy (PDL) on all petroleum products, significantly increasing the tax burden on fuel consumers. This move aims to boost tax revenues, with part of the collections being redirected to lower electricity tariffs and fund infrastructure improvements.

In the span of a month, the petroleum levy has been raised twice. The first hike came on March 16, 2025, when the levy on petrol and diesel was increased by PKR 10/liter to PKR 70/liter. High Octane Blending Component (HOBC) saw an even steeper increase of PKR 20/liter.

In the latest move from the government, the petroleum development levy has been raised on all petroleum products effective April 16, by up to PKR 8/liter.

While the government recently announced a PKR 7.41/unit cut in electricity tariffs, only PKR 1.71/unit of this relief stems directly from the increased petroleum levy.

What you actually pay at the pump

Despite the base cost of fuel being significantly lower, taxes and other charges sharply inflate retail prices.

The Inland Freight Equalization Margin is used to equalize transportation costs across regions while profit margins of oil marketing companies and dealers are also included in the retail price.

The government had initially proposed raising the PDL cap to PKR 80/liter during the 2025 federal budget, but the Finance Committee capped it at PKR 70/liter through the Finance Bill.

A new Presidential Ordinance issued on April 15 has since removed Schedule 5, giving the Ministry of Finance interim authority to raise petroleum taxes further. This ordinance requires ratification by the National Assembly within 90 days and is expected to be formally included in the upcoming Finance Bill 2025–26.

With these increases, the government hopes to reach a full-year PDL collection target of PKR 1.2 trillion. As of March 31, 2025, unofficial estimates place collections at approximately PKR 845 billion. However, shortfalls of PKR 50–75 billion are still possible.