Consumers Pay Rs80/Litre in Hidden Taxes
ISLAMABAD: Consumers in Pakistan are paying almost Rs80 per litre in taxes on petrol and diesel, even though the government charges zero percent sales tax on petroleum products.
Official price buildup data for mid-August shows that the Petroleum Levy (PL) is the largest tax component, fixed at Rs78.02 per litre on petrol and Rs77.01 per litre on diesel. The levy has become critical for the federal government to bridge fiscal gaps under its commitments with the International Monetary Fund (IMF).
In addition to the PL, a Carbon Surcharge Levy of Rs2.50 per litre applies to both fuels. This raises the total tax burden to Rs80.52 per litre on petrol and Rs79.51 per litre on diesel.
Other charges, including the Inland Freight Equalization Margin (IFEM), distribution margins, and dealer commissions, are not classified as taxes but further raise retail fuel prices for consumers.
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For mid-August, the maximum depot price of petrol was Rs264.61 per litre, of which just over 30% comprised taxes. Diesel was priced at Rs272.99 per litre, with taxes accounting for 29% of the final price. This means nearly one in every three rupees spent on fuel goes directly to government coffers.
While the government highlights the absence of sales tax as consumer relief, critics note that reliance on the petroleum levy shifts the burden onto households and businesses. Unlike the General Sales Tax, which is shared with provinces through the National Finance Commission (NFC) Award, the petroleum levy is retained entirely by the federal government.
International oil prices have softened in recent weeks. Diesel’s ex-refinery price, for instance, dropped by Rs13.20 per litre between August 1 and August 16. However, consumer prices did not reflect the same reduction because of the fixed levy.
The tax-heavy pricing structure hits transporters, farmers, and industrial users hardest. Diesel, the primary fuel for freight and agriculture, directly drives food inflation and logistics costs.
