Govt considers cutting petroleum levy to Rs5-10 per litre, replacing Rs1.5 trillion revenue through new taxes, savings: report

According to Business Recorder, the federal government is examining a Jamaat-e-Islami plan to lower the petroleum development levy (PDL) step by step, to Rs5-10 per litre. The proposal would offset a projected annual revenue shortfall of Rs1.45-1.50 trillion through new taxes, removal of exemptions, spending cuts and tighter tax enforcement. It is still under consultation and has not been approved, with the Ministry of Planning seeking stakeholder input.

The levy raised Rs1.557 trillion in FY2025-26, beating a Rs1.468 trillion goal, and the FY2026-27 goal is put at Rs1.576 trillion. Lowering it to Rs5-10 per litre within a year would still leave about Rs96-180 billion in residual levy income. To close the gap, the document examines raising Federal Excise Duty (FED) on luxury goods and high-end spending, alongside a 5-7.5 percentage point surcharge aimed at 200-300 of the biggest firms and ultra-rich earners.

Since PDL is classed as non-tax income and kept fully in federal hands, while most replacement taxes go partly to provinces under the NFC Award, gross FBR receipts would have to exceed the shortfall roughly 2.3 times over. Any cut would need IMF talks and offsetting measures, because the levy is counted as committed revenue under the IMF Extended Fund Facility. According to the document, banking, upstream oil and gas, fertiliser and cement firms are expected to carry a heavy share of the burden.