ISLAMABAD: The International Monetary Fund (IMF) has recommended raising hike in fuel prices in Pakistan. It included motor spirit and high-speed diesel prices by Rs47 per litre. This would apply the standard 18% sales tax rate.
Media reports say that the IMF also pushed for a Rs5 per litre increase in the carbon levy for consumers.
The Petroleum Division said it remains neutral on the Power Division’s request for extra funds. However, it warned against adding more pressure on the already struggling petroleum sector.
Earlier, the Petroleum Division had proposed a 3% sales tax. The IMF rejected this proposal.
Prime Minister Shehbaz Sharif had announced a cut in electricity tariffs — Rs7.41 per unit for domestic users and Rs7.69 for industrial users. But the relief depends on global energy prices and summer hydropower supply.
On March 16, 2025, after global petroleum prices dropped, the government increased the petroleum levy from Rs60 to Rs70 per litre.
The Petroleum Division has warned that if international prices rise again, the government will face a tough choice. It may have to either increase retail fuel prices or reduce the petroleum levy to protect consumers. Either move would risk missing the Rs58.6 billion collection target linked to the power relief package.
The Finance Division has set a record petroleum levy target of Rs1.281 trillion for FY 2024–25. By February 2025, it had collected Rs744 billion — only 58% of the target. This shortfall has raised serious concerns.
The Petroleum Division also flagged financial stress in the oil sector. Zero-rating sales tax on MS and HSD to help refineries and oil marketing companies has caused Rs35 billion in estimated losses this fiscal year.
Despite the earlier 3% sales tax idea, the IMF has stuck with its demand for the full 18% rate. It also insists on a new Rs5 per litre carbon levy, which would further raise fuel prices.
In a letter dated April 7, 2025, the Petroleum Division responded to the Power Division’s summary titled “Tariff Rationalization for Power Sector.” The letter objected to using the Rs10 per litre petroleum levy hike to fund electricity relief. It called the move unfair and burdensome.
The Division urged decision-makers to assess the broader energy sector impact before approving new financial demands.
