Govt Plans Rs. 5/Litre Carbon Levy on Petrol, Diesel to Raise Rs. 90 Billion

The federal government is preparing to impose a carbon levy of Rs. 2.5 per litre on petrol and diesel in the upcoming budget for FY2025-26, Finance Division sources told ProPakistani. The new tax will be implemented alongside the existing petroleum levy and is expected to generate up to Rs. 45 billion in revenue during the next financial year. It will not apply to kerosene and light diesel oil. The same levy will be increased to Rs. 5 per litre to generate Rs. 90 billion in FY27, sources added. The funds collected will be allocated towards green budgeting initiatives. There will be no separate legislation for the carbon levy in the new budget, and it will be included under existing budgetary provisions. The measure comes after the government concluded negotiations with the International Monetary Fund (IMF) for the FY26 budget. The introduction of the levy may lead to further increases in petroleum prices.