Pakistan’s federal government is expected to miss its petroleum levy (PL) target for the current fiscal year, as rising global oil prices, driven by geopolitical tensions between Israel and Iran—threaten to push domestic fuel prices higher and dampen consumption.
After Israel launched fresh attacks on Iran on Friday, international oil markets reacted swiftly. Brent crude prices climbed, with petrol increasing by $1.98 per barrel to $73.79, while high-speed diesel (HSD) rose $2.54 per barrel to $78.68. The premium on petrol also increased by $2.16 per barrel to $79.35. The HSD premium, however, remained unchanged at $3.25 per barrel.
As a result, domestic fuel prices are likely to rise. Estimates suggest petrol could go up by Rs4.38 per litre and HSD by Rs5.02 per litre starting June 16. Without factoring in adjustments from Pakistan State Oil (PSO), petrol’s base cost has already increased by Rs3.98 per litre to Rs141, while HSD has jumped by Rs4.66 per litre to Rs145.58.
Customs duties are also set to rise slightly with charges on HSD moving Rs14.20 to Rs14.56 per litre and on petrol from Rs13.70 to Rs14.10. Furthermore, USD to PKR exchange rate edged up from Rs282.20 to Rs282.49, exerting further upward pressure on local fuel prices.
Officials say if the government permits PSO-related adjustments, actual retail prices could rise beyond current projections.
In the outgoing fiscal year (2024–25), the government had revised its petroleum levy collection target to Rs1,161 billion, down from the originally budgeted Rs1,281 billion. However, in the first nine months (July to March), only Rs834 billion was collected, just 71 per cent of the revised estimate.
Analysts say the government’s ability to meet its ambitious PL target of Rs1.4 trillion for 2025–26 is at risk, as higher fuel prices may reduce consumption across the board.
To make up for revenue gaps, the government has already taken steps to increase the levy. Since March 16, it removed the Rs60 per litre cap through a presidential ordinance, allowing additional collections of Rs18.02 per litre on petrol and Rs17 on HSD.
According to a senior official from the Oil and Gas Regulatory Authority (OGRA), speaking on condition of anonymity, the move is expected to generate Rs90 billion in quarterly revenue and Rs300 billion annually at current consumption levels.
