ISLAMABAD: The Petroleum Division has voiced strong reservations over the recent decision to hike the petroleum levy (PL) on motor spirit (MS) and high-speed diesel (HSD) by Rs10 per litre—raising the total levy to Rs70 per litre—as part of a plan to reduce electricity tariffs.
Sources told Business Recorder that the increase, which aims to generate Rs58.6 billion to lower power tariffs by Rs1.71 per unit, is being seen as an unfair burden on the petroleum sector.
The Petroleum Division formally conveyed its objections to the Power Division on April 7, 2025, in response to a summary titled “Tariff Rationalization for Power Sector” submitted to the Economic Coordination Committee (ECC). Prime Minister Shehbaz Sharif had previously announced substantial tariff relief—Rs7.41/unit for domestic users and Rs7.69/unit for industry—but its sustainability remains uncertain, hinging on global energy prices and hydropower availability.
The levy increase was enforced on March 16, 2025, following a dip in international petroleum prices. However, the Petroleum Division warned that any rebound in prices could force a rollback of the PL increase or a hike in retail prices, threatening the Rs58.6 billion collection goal.
The Finance Division has set a PL revenue target of Rs1.281 trillion for FY2024–25, but only Rs744 billion (58%) had been collected by February 2025.
The Petroleum Division also pointed to the financial strain on refineries and oil marketing companies (OMCs), citing losses of Rs35 billion due to zero-rating sales tax on MS and HSD. While a 3% sales tax was proposed to address these issues, it was dropped under IMF pressure to impose the standard 18%, which could raise fuel prices by Rs47 per litre.
Further, the IMF has suggested a Rs5 per litre carbon levy—another potential burden on consumers. The Petroleum Division maintained a neutral stance on the Power Division’s funding request but urged careful consideration of its impact on the already strained petroleum sector.
Story by Mushtaq Ghumman
