New Carbon Levy Proposed on Petrol and Diesel

The federal government has put forward a proposition to introduce a carbon levy of Rs2.5 per litre on petrol, high-speed diesel (HSD), and furnace oil for the upcoming fiscal year 2025-26. This new tax is planned to be in conjunction with the existing petroleum levy already in place on these products.

The government anticipates that this measure will generate approximately Rs46 billion in revenue during the fiscal year 2025-26. This levy will not be applicable to kerosene oil and light diesel oil (LDO).

Sources indicate that the levy is slated to increase to Rs5 per litre in fiscal year 2026-27, with projected revenue reaching Rs95 billion. The funds accrued from this levy will be specifically directed towards supporting green budgeting initiatives. This decision follows the conclusion of negotiations between the government and the International Monetary Fund (IMF) regarding the fiscal year 2026 budget.