ISLAMABAD – The federal government has decided to impose a carbon levy of Rs2.5 per liter on petroleum products in the upcoming fiscal year 2025-26 as part of its budgetary measures.
Reports said the levy is expected to be increased to Rs5 per as the government aims to generate approximately Rs. 45 billion in revenue during the next fiscal year.
By the fiscal year 2027, the income from this levy is projected to double, significantly contributing to the national exchequer.
The levy will be applied in parallel with the existing petroleum development levy (PDL) on petrol and diesel. However, kerosene and light diesel oil will remain exempt from this new charge.
There are concerns that the imposition of the carbon levy may result in higher prices for petrol and diesel in the country, putting an additional burden on consumers.
Nevertheless, the levy will not require separate legislation in the upcoming budget, as it will be incorporated through existing fiscal mechanisms.
The revenue to be generated from the carbon levy will be allocated specifically for green budgeting initiatives, supporting environmentally sustainable projects and reforms.
It comes after the Pakistani authorities and and the International Monetary Fund (IMF) agreed on it in recent budget talks.
The federal government is expected to present the Budget 2025-26 on June 10, 2025.
