Starting July 1, 2025, the federal government of Pakistan will begin charging two new taxes on fuel — a Rs. 77 per litre petroleum levy and a carbon levy of up to Rs. 5 per litre on petrol, diesel, and furnace oil.
These taxes are part of Pakistan’s deal with IMF under the Resilience and Sustainability Facility (RSF) program.
The goal is to raise funds for climate-related efforts and meet the conditions agreed with the IMF. These levies will be officially included in the Finance Bill for 2025–26, which must be approved before June 30, 2025.
The carbon levy will begin at Rs. 2.5 per litre and increase to Rs. 5 per litre in the following year.
However, this move has received strong criticism from the local oil industry. Industry experts say that these taxes will seriously damage the sale of furnace oil, which is already declining. They also warn that these steps could reduce the government’s overall tax revenue, instead of helping it grow.
Oil companies have also blamed the government for not removing sales tax exemptions on petroleum products something it had previously promised to do.
Despite the criticism, the government remains committed to these reforms. In return for following the IMF plan, Pakistan is set to receive $1.4 billion in RSF funding. Additionally, the IMF has agreed to extend Pakistan’s current $7 billion loan, which is expected to support further climate-friendly economic policies.
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