Govt Hikes PL Target, Blocks Fuel Price Relief

Sulman khan

Islamabad:The government has set an ambition target of petroleum levy (PL) on petroleum products for next fiscal year which would result in denying the consumers from relief on account of reduction in oil prices.

Economic Coordination Committee (ECC) had recently increased the maximum cap of petroleum levy up to Rs 90 per liter.

Keeping in view higher limit of the petroleum levy, the government has decided to increase the revenue collection target on account of petroleum levy on petroleum products.

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According to budget documents, the government has raised 26 percent petroleum levy collection on petroleum levy for next fiscal year.

The government has set a petroleum levy collection target of Rs 1,468.395 billion target 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 target of Rs 1,281 billion for the outgoing fiscal year 2024-25.

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.

This is why the government has increased the rate of petroleum levy on petroleum products while maintaining the zero rate of generals sales tax to deprive the provinces from the revenue collection.

A budgeted target of Rs 105 billion has been set by imposition of a levy on Off the Grid (Captive Power Plants) for next fiscal year. The National Assembly passed the “Off the Grid (Captive Power Plants) Levy Bill, 2025,”. This levy, will initially be 5 percent which 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 Rs 2.5 billion for the current fiscal.

The previous government of PPP had imposed this cess to generate revenue meant for building mega oil and gas pipelines. But textile industry and other industrial barons had obtained stay orders and the issue was taken up by Supreme Court of Pakistan during PTI government. 

In June 2020, the Supreme Court of Pakistan ruled that various sectors of the economy must clear outstanding of Rs 407 billion GIDC in installments but the government failed to receive payments due to stay orders obtained by the industries again.

Natural Gas Development Surcharge (GDS) – the difference between prescribed and sale price of gas that goes to provinces – has also been projected to bring Rs 49.437 billion revenue next year against original budgeted Rs 25.618 billion and revised Rs 48 billion in the outgoing fiscal year.

The government has also envisaged to collect Rs 5 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 Rs 3.537 billion.

The budget for fiscal year 2025-26 also envisaged Rs 30 billion to be retained as a discount on local crude oil prices. This is the higher as the revised estimate of Rs 25 billion for the current fiscal year. The original budget for the current year was the same at Rs 25 billion.

The budget for next year also 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 Rs 69 billion for next financial year against the revised estimates of Rs 64 billion for the outgoing year.

The government budgeted Rs 38 billion in royalty on natural gas in the next financial year against a revised target of Rs 135 billion and budgeted Rs 103.751 billion in 2024-25.

The next year’s budget envisages Rs 20 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 Rs 450 million in current fiscal year.