Petroleum products: 26.4pc rise in PL envisaged
ISLAMABAD: The federal budget 2025-26 envisages a 26.4 percent raise in petroleum levy (PL) on petroleum products after raising its maximum limit to Rs 90 per litre from Rs 70 per litre.
A significant Rs 1,468.395 billion PL on petroleum products has been budgeted for upcoming fiscal year. This represents a substantial rise of Rs 307.395 billion compared to the current revised estimates of Rs 1,161 billion for the ongoing fiscal year. It is also considerably higher than the original budgeted PL of Rs 1,281 billion for the outgoing fiscal year 2024-25.
Next fiscal year's budgeted PL is Rs 158 billion higher than what was projected for next fiscal year under this head by the International Monetary Fund in its first staff-level report uploaded on its website on May 17, 2025. The projected collection is Rs 1311 billion for next fiscal year.
Last 3-1/2 months of FY25: petroleum levy hike by Rs18.02 to generate Rs90bn revenue
The PL revenue has been given a high priority by successive federal governments as it is not part of the Federal Divisible Pool (FDP) that has to be shared with the provinces as per the National Finance Commission (NFC) formula.
A budgeted target of Rs 105 billion through imposition of a levy on Off the Grid (Captive Power Plants) has been set for next fiscal year. The National Assembly passed the 'Off the Grid (Captive Power Plants) Levy Bill, 2025'. This levy, initially 5 percent, will increase to 10 percent by July 2025, 15 percent by February 2026, and 20 percent by August 2026.
The government has also proposed to increase the Gas Infrastructure Development Cess (GIDC) collection at Rs 2.4 billion for the next fiscal year from revised current estimates of Rs 1 billion. The GIDC was originally budgeted at an amount of Rs2.5 billion for the current fiscal.
In June 2020, the Supreme Court of Pakistan ruled that various sectors of the economy must clear outstanding Rs 407 billion GIDC in 60 months but the government has yet to realize this amount due to stay orders obtained by various companies.
Natural Gas Development Surcharge (GDS) - the difference between prescribed and sale price of gas that goes to provinces - is projected to bring Rs49.437 billion next year against original budgeted Rs25.618 billion and revised Rs48 billion in the outgoing fiscal year.
The government has also envisaged to collect Rs5 billion for the PL on Liquefied Petroleum Gas (LPG) in next fiscal 2025-26. This is compared to the revised target of Rs 3.156 billion for the current fiscal year. The original budget for the PL on LPG in the current fiscal year was at Rs3.537 billion.
The budget for fiscal year 2025-26 envisages Rs30 billion to be retained as a discount on local crude oil prices. This is higher than the revised estimate of Rs 25 billion for the current fiscal year the same as budgeted for the current year.
The budget for next year proposes an increase in royalty on crude oil and increase in royalty on natural gas for provinces. The budgeted amount for royalty on crude oil is set at Rs69 billion for next financial year against the revised estimates of Rs64 billion for the outgoing year. The government budgeted Rs38 billion in royalty on natural gas in the next financial year against a revised target of Rs135 billion and budgeted Rs103.751 billion in 2024-25.
Next year's budget envisages Rs20 billion on account of windfall levy on crude oil against budgeted amount of Rs 28 billion for the current financial year 2024-25. Windfall levy on gas has been budgeted at Rs 450 million which was revised estimates of Rs450 million in current fiscal year.
Miscellaneous receipts of oil and gas companies are budgeted to generate Rs 1887.682 billion against a revised estimate of Rs 1464.606 billion and budgeted estimates of Rs 1528.46 billion in the outgoing financial year.
Copyright Business Recorder, 2025
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