ISLAMABAD: Government introduces new formula regarding petroleum levy.
According to the details, Consumers across Pakistan might finally see some relief at the gas pumps as the government introduces a new pricing formula aimed at reducing the burden of the petroleum levy, with a potential cut of Rs. 10 to 15 per liter on petrol.
In a direct move to lower the petroleum levy on consumers, the Petroleum Division has issued a revised price mechanism for oil refineries.
This new directive mandates that refineries now contribute a share to the Petroleum Development Levy (PDL).
According to sources, accidental charges on import cargo will be pegged to pre-March levels, and the savings generated from this adjustment are to be used specifically to reduce the petroleum levy.
This intervention could decrease the PDL by up to Rs. 15 per liter; however, refinery sources have voiced concerns, warning of a potential loss of over Rs. 30 per liter to their operations due to this petroleum levy restructuring.
Under the new guidelines, the import price of petrol will be determined based on Pakistan State Oil’s (PSO) actual import cargo cost.
If this actual cost is not available, the premium and additional expenses from the last cargo can be used. Oil refineries are permitted to fix the ex-refinery price of petrol at the level of March 7, 2026, for the next 30 days, keeping the premium, extra expenses, and customs duty constant for that period.
Crucially, the sources revealed that any difference between the import and ex-refinery prices must be deposited by the refineries as part of the petroleum levy.
The Petroleum Division has officially directed all oil refineries to submit detailed reports of daily petrol sales to the Oil and Gas Regulatory Authority (OGRA) and the Petroleum Division.
Refineries must include CP Rs and chalans with these sales reports. OGRA and the Petroleum Division will then verify the calculations and additional petroleum levy payments.
While this is seen as positive for consumers, the refinery sector has labeled this petroleum levy adjustment as a “political” move and has announced intentions to write a formal letter to the government requesting a review of the decision.
Despite this pushback, the government remains committed to ensuring that the benefit of this petroleum levy rationalization is passed on exclusively to petrol consumers.
A Technical Overview: Petroleum Levy in Pakistan
The Petroleum Levy (PL), formerly known as the Petroleum Development Levy (PDL), is a strategic non-tax revenue collection mechanism utilized by the Federal Government of Pakistan.
It is an indirect tax levied on petroleum products, such as motor spirit (petrol), high-speed diesel (HSD), kerosene oil, and light diesel oil, and is collected from consumers at the point of sale by Oil Marketing Companies (OMCs) and deposited in the federal exchequer.
Unlike other taxes that might be dedicated to specific development projects, the revenue generated from the petroleum levy is generally categorized as federal divisible pool and is essential for achieving revenue targets and stabilizing the budget, particularly under fiscal consolidation programs.
The government holds the legal authority to determine and adjust the rate of the petroleum levy per liter for various products, subject to an upper limit set by the Petroleum Development Levy Ordinance.
It serves as a vital tool for the government to manage retail oil prices and domestic inflation while ensuring a critical and stable stream of revenue for the national exchequer, especially when global crude oil prices fluctuate.
Given its significance, regular adjustments to the petroleum levy are a common feature of Pakistan’s economic landscape, directly impacting the transport sector, the cost of goods, and the general public’s disposable income, making it a crucial element in Pakistan’s energy policy and overall financial stability.
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The recently announced measures highlight the government’s attempts to navigate the complex interplay between revenue requirements and public inflation relief through the petroleum levy.
