Will Petroleum Levy Increase to Rs. 100/Liter?

Could petrol prices in Pakistan experience another significant increase in the near future? There is a possibility, as suggested by media reports. During discussions for a new loan installment, officials have indicated a potential rise in the petroleum levy (PL). Currently, the government imposes a PL of Rs. 60 per liter on both petrol and diesel, a measure that was previously raised in accordance with IMF requirements during prior negotiations.

The reports suggested that it was hinted during the talks that the PL could be hiked to Rs. 100/liter from the existing rate of Rs. 60/liter on sales of major oil products. The proposal may be provided in the Finance Bill 2025, and the levy will be increased instead of imposing General Sales Tax (GST), which currently stands at 0%.

The development was also tweeted by economist Abdul Rehman, stating: “Important conditions/policies discussed for next Pakistan IMF program. The petroleum levy limit is to be enhanced to Rs 100/liter instead of GST.”

GST Proposal

Earlier this month, the reports suggested that the IMF has recommended increasing general sales tax (GST) from 0% to 18% on several dozen items, including petroleum products. IMF estimated this “rationalization” of GST rates could generate revenue equivalent to Rs. 1,300 billion, contributing 1.3% to Pakistan’s GDP. However, the IMF didn’t assess the potential inflationary impact of this indirect taxation.

In conclusion, either the government will increase PL on petroleum goods, or GST will be imposed, resulting in a new wave of inflation for already burdened masses. The petrol and diesel prices are directly linked to the rate of inflation in Pakistan because as soon as fuel prices go up, everything becomes expensive, especially the daily commodities, hitting the day-to-day life of an ordinary person. The picture will be cleared with the finalization of the talks between Islamabad and the IMF.