Government Pushes for Electric Vehicles with New Carbon Levy and EV Policy in Budget 2025-26

Islamabad:The federal government of Pakistan has announced a **strategic policy shift to promote electric vehicles (EVs)**, as part of its **2025-26 budget**, with measures aimed at reducing dependence on fossil fuels and lowering carbon emissions.

### 🔋 Key Measures Announced:

* A **carbon levy of Rs. 2.50 per litre** on petroleum products has been proposed for the current year, with a further increase to **Rs. 5 per litre next year**, to **discourage fuel consumption**.
* A **new energy vehicle policy** has been introduced, focusing on encouraging the use of **two- and three-wheeled electric vehicles**, which dominate local transportation in Pakistan.
* **Petroleum levy on furnace oil** will be imposed according to rates set by the federal government.

### 🚗 Taxation Changes:

* The government has proposed **uniformity in sales tax rates** across **petrol, diesel, and hybrid vehicles**.
* Vehicles currently taxed below the general 18% sales tax threshold, including some hybrid cars, will now face the **standard 18% sales tax**.
* For instance, **hybrid cars up to 1800cc**, which are currently taxed at **8.5%**, will now be subject to **18%** sales tax, aligning with conventional vehicles.

### 🌱 Policy Implications:

The budget clearly reflects the government’s **intent to create a level playing field** for electric vehicles by **removing tax advantages from fuel-based cars** and **disincentivizing fossil fuel consumption** through carbon levies.

This shift is seen as a **green signal for investment in the EV sector**, while also addressing climate concerns and rising fuel import costs.

The new budget measures are expected to **boost local EV production, encourage eco-friendly mobility**, and align Pakistan’s transport policy with global sustainability goals.