The Ministry of Finance has called on the relevant ministries to ensure the implementation of tax measures agreed upon with the International Monetary Fund (IMF) under the Resilience and Sustainability Finance (RSF) agreement. These measures include the introduction of a Rs5 per litre carbon levy on gasoline and diesel, with the goal of gradually implementing the tax by June 2025.
BR reported that the carbon levy will be phased in over two years, starting with a supplementary carbon levy under the Petroleum Development Levy (PDL) on fuel. This will apply to both gasoline and diesel, with a base and supplementary rate introduced for fuel oil as well.Â
The full scope and rate of the carbon levy will be finalized through the FY26 Finance Act, with future Finance Acts potentially allowing for further increases if necessary.
In addition to the carbon levy, the government has committed to promoting the adoption of electric vehicles (EVs) by June 2025. As part of the FY26 budget law, a revenue-neutral scheme will be introduced, which will include subsidies for EVs and a supplementary tax on internal combustion engine vehicles, in alignment with the draft National Electric Vehicle Policy (NEVP) for 2025-2030.
The government also plans to set up EV charging stations by February 2027. To encourage private sector investment, a Viability Gap Funding (VGF) framework will be adopted, offering one-off subsidies and ensuring competition through an open bidding process.Â
The Finance Ministry intends to collaborate with the Asian Development Bank (ADB) or the International Finance Corporation (IFC) to ensure the VGF framework follows international best practices and minimizes risks to the government.
The Finance Ministry has instructed the concerned ministries to ensure timely implementation of the agreed reforms under the RSF, as part of Pakistan’s ongoing commitments to the IMF.
