The federal government has set a record target for petroleum levy (PL) collection for the upcoming fiscal year 2025-26, aiming to raise Rs1.47 trillion, a 26% increase from the revised target of Rs1.16 trillion for the current fiscal year 2024-25. This rise comes despite a reduction in global oil prices, which would typically ease pressure on consumers.
The Economic Coordination Committee (ECC) recently raised the maximum petroleum levy cap to Rs90 per litre, and with this higher cap in place, the government has adjusted its revenue collection target accordingly. The revised PL target represents an increase of Rs307 billion compared to the current fiscal year’s estimates of Rs1.161 trillion. This target is also considerably higher than the original PL target of Rs1.28 trillion for the 2024-25 fiscal year.
This hike follows the government’s long-standing practice of maintaining a high petroleum levy rate while keeping the general sales tax rate on petroleum products at zero, effectively depriving provinces of additional revenue.
The government has also introduced a new levy on Off-the-Grid (Captive Power Plants), with a target of Rs105 billion for the next fiscal year. This levy will begin at 5% and rise incrementally to 20% by 2026.Â
Additionally, the Gas Infrastructure Development Cess (GIDC) collection target has been raised to Rs2.4 billion for FY2025-26, up from the revised target of Rs1 billion for the current fiscal year.
Further measures in the budget include an increase in royalty payments for crude oil and natural gas, with a projected Rs69 billion for crude oil royalties and Rs38 billion for natural gas royalties.Â
Moreover, the government aims to collect Rs20 billion through a windfall levy on crude oil and Rs450 million from the windfall levy on gas. The budget also includes Rs5 billion in PL from Liquefied Petroleum Gas (LPG), up from Rs3.16 billion in the current fiscal year.
