Pakistan Government Weighs Abolishing Petroleum Levy For One Year: JI Proposal Submitted To Ministry Of Planning Circulated To Finance Ministry FBR State Bank Slash PDL To Rs5-10 Per Litre From Rs80 Revenue Collected FY2025-26: Rs1.557 Trillion Target Rs1.468 Trillion FY2026-27 Target Rs1.576 Trillion
Pakistan’s government is formally considering a proposal to abolish or drastically reduce the petroleum levy for one year, a move that would provide immediate relief to millions of consumers but would require finding replacement revenue of up to Rs1.5 trillion, a figure that raises serious questions about fiscal viability and IMF compliance. Pakistan Connect
The proposal, submitted by Jamaat-i-Islami and circulated by the Ministry of Planning to the Finance Ministry, the Federal Board of Revenue and the State Bank of Pakistan, suggests slashing the Petroleum Development Levy from its current Rs80 per litre to just Rs5–10 per litre. The government collected Rs1.557 trillion through the PDL in FY2025-26, exceeding its target of Rs1.468 trillion and expects Rs1.576 trillion in FY2026-27. Cutting to Rs5–10 per litre would leave only Rs90–180 billion in annual revenue, creating a potential hole of Rs1.45–1.50 trillion.
JI’s proposed replacement strategy targets luxury consumption, wealthy individuals, major corporations, property, agriculture and the retail sector. The complication is structural: the petroleum levy is non-tax revenue that goes directly to the federal government, while most FBR taxes are distributed between the centre and provinces under the NFC Award, meaning a levy-to-tax switch also reshuffles provincial finances.
At current fuel prices with Brent around $108 a barrel and petrol at approximately Rs370 per litre, the Rs80 PDL plus Rs5 Climate Support Levy represents the most visible portion of consumer fuel costs. Planning Minister Ahsan Iqbal and the government have formed joint expert committees with JI to evaluate the proposal.
The proposal is politically attractive. The fiscal mathematics are considerably harder. Check out our previous coverage of Pakistan’s economy on The Trusted Times.
