Petrol Prices Set to Rise as Government Plans Carbon Levy in Budget 2025–26
The federal government is preparing to introduce a carbon levy of Rs. 2.5 per liter on petroleum products as part of the 2025–26 budget, aiming to collect approximately Rs. 48 billion in revenue during the upcoming fiscal year.
This levy will apply to motor spirit and high-speed diesel, and is projected to increase to Rs. 5 per liter in the 2026–27 fiscal year, potentially doubling the revenue to Rs. 96 billion.
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In addition, furnace oil will be subject to a carbon levy of Rs. 2 per liter (or Rs. 2,665 per metric ton) in FY26, rising to Rs. 5 per liter in FY27. The new tax will be in addition to the current petroleum levy already in place.
The implementation will require amendments to the Petroleum Products (Petroleum Levy) Ordinance of 1961, signaling a major policy shift towards climate-oriented taxation and revenue generation.
