Petroleum Division Expresses Concerns Over Additional Levy on Fuel, Warns of Financial Strain
Islamabad – The Petroleum Division has raised serious concerns over the imposition of an additional 10 rupees per liter Petroleum Levy (PL) on Motor Spirit (MS) and High-Speed Diesel (HSD), which has now increased the total levy to 70 rupees per liter. This decision is part of an effort to generate additional revenue of 58.6 billion rupees to reduce electricity rates by 1.71 rupees per unit.
According to a report by *Business Recorder*, the petroleum sector has criticized this move as an unfair burden, expressing apprehension over the financial strain it will place on the industry. On April 7, 2025, the Petroleum Division formally conveyed its concerns to the Power Division. This letter was in response to a summary presented by the Economic Coordination Committee (ECC) of the Power Division, which was titled *”Balancing of Electricity Tariffs.”*
### **Electricity Relief and its Sustainability**
Prime Minister Shehbaz Sharif had previously announced a reduction of 7.41 rupees per unit for domestic consumers and 7.69 rupees per unit for industrial consumers. However, the sustainability of this relief is contingent on global energy prices and the availability of hydropower during the summer months.
Following a decline in global oil prices on March 16, 2025, the government raised the Petroleum Levy from 60 rupees to 70 rupees per liter. The Petroleum Division warned that if global oil prices rise during the remainder of the fiscal year, the government may be forced to either increase retail fuel prices or reduce the levy, making it difficult to achieve the desired revenue targets.
### **Financial Target and Challenges**
The Ministry of Finance has set a target of 1.281 trillion rupees for the Petroleum Levy in the fiscal year 2024-25. By February 2025, 744 billion rupees, or 58% of this target, had already been collected.
However, the Petroleum Division highlighted the financial challenges faced by the oil industry. In previous years, sales tax on MS and HSD was reduced to zero in order to alleviate the additional input tax burden on refineries and oil marketing companies (OMCs), resulting in a loss of approximately 35 billion rupees.
### **Need for Immediate Action**
The Petroleum Division stressed the urgent need for measures to support the sustainability of refineries and provide financial assistance to OMCs. One proposal under consideration is the imposition of a 3% sales tax. However, the International Monetary Fund (IMF) has recommended an 18% standard rate, which could increase MS and HSD prices by 47 rupees per liter.
Additionally, the IMF has proposed a 5 rupees per liter carbon levy, further escalating fuel prices.
### **Avoiding Additional Burden on the Petroleum Sector**
Sources revealed that the Petroleum Division, while remaining neutral on the Power Division’s request for additional funds, advised against further burdening the petroleum sector, especially in light of the existing challenges it is already facing.
The Petroleum Division’s concerns highlight the delicate balance the government must strike between fiscal targets and the financial sustainability of the energy sector, which continues to play a crucial role in the economy.
