ISLAMABAD — The Senate Standing Committee on Finance has rejected the government’s proposal to impose a carbon levy of Rs2.5 per litre on petroleum products, raising fresh questions about the fiscal viability of a measure that was expected to bring in Rs48 billion in revenue in the upcoming fiscal year.
According to Finance Ministry sources, the majority of members on the committee opposed the levy during recent budget deliberations, citing concerns over its potential inflationary impact at a time when fuel prices remain high and cost-of-living pressures persist. The proposed levy was to be applied on petrol, high-speed diesel, and furnace oil, and was expected to be doubled to Rs5 per litre by FY2026–27.
Originally unveiled by Finance Minister Muhammad Aurangzeb during his budget speech, the measure was framed as a dual-purpose tool — designed to broaden non-tax revenues while also encouraging a shift away from fossil fuel consumption. The government had earmarked the funds generated for green energy initiatives, including support for investment in alternative fuels and renewable energy technologies.
Officials had also argued that the levy could help reduce Pakistan’s fuel-driven import bill, improve energy security, and signal progress toward climate-linked policy targets under international frameworks.
However, the rejection by the Senate committee has cast doubt over the proposal’s immediate prospects. It is now unclear whether the Finance Ministry will seek to revise, defer, or reintroduce the measure in another form before the budget is finalized.
The setback adds to the government’s growing list of challenges as it attempts to balance fiscal consolidation with inflation control and meet broader reform commitments.
