Pakistan to impose Rs77 per litre levy on furnace oil from next month 

ISLAMABAD: Pakistan plans to impose a Petroleum Levy of Rs77 per litre on furnace oil starting July 1 as part of sweeping fiscal and environmental reforms agreed with the International Monetary Fund. 

The new levy, equal to Rs82,077 per metric ton, will come into effect following the enactment of amendments to the Petroleum Levy Ordinance, 1961, through the Finance Act for fiscal year 2025-26. In addition to the Petroleum Levy, a Carbon Levy of Rs2.5 per litre will also be introduced on furnace oil, which will double to Rs5 per litre in the following year. 

The move is aligned with commitments under the IMF’s Resilience and Sustainability Facility (RSF), under which Pakistan has agreed to gradually introduce carbon pricing on major fuels including petrol, diesel,and furnace oil to boost revenues and address climate concerns. 

According to a memorandum of understanding shared with the IMF, a Carbon Levy of Rs2.5 per litre will also apply to petrol and high-speed diesel in FY2025-26. This will increase to Rs5 per litre in FY2026-27. The levy will be collected through the existing Petroleum Development Levy mechanism. 

The federal government is empowered to notify and adjust these levy rates under the amended Petroleum Levy Ordinance. The Petroleum Division said these rates were negotiated with the IMF and will take effect once Parliament passes the Finance Act. 

A summary of the proposals, including both the carbon and petroleum levies, has been submitted to the federal cabinet for formal approval. Officials said the rates were jointly finalised by the Finance and Petroleum Divisions in consultation with the IMF, and therefore did not require additional clearance from the Finance Ministry. 

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