Finance Ministry confirms new levy to meet IMF conditions; revenue target set at Rs45 billion
ISLAMABAD: The federal government has decided to introduce a carbon levy of Rs2.5 per litre on key petroleum products, including petrol, high-speed diesel, and furnace oil, as part of the 2025-26 federal budget.
The move, confirmed by the Finance Ministry on Tuesday, is reportedly in line with conditions set by the International Monetary Fund (IMF). The levy is expected to generate an estimated Rs45 billion in revenue during the upcoming fiscal year.
Levy to double in 2026-27
Sources in the ministry revealed that the carbon levy rate will be doubled to Rs5 per litre starting from the fiscal year 2026-27. The gradual increase is part of the government’s broader plan to enhance climate-related fiscal measures while fulfilling IMF commitments.
Kerosene and light diesel exempted
The carbon levy will not apply to kerosene oil and light diesel oil, providing some relief to low-income consumers who largely rely on these fuels, especially in rural areas.
Revenue push amid budget challenges
The carbon levy comes at a time when the government is under pressure to boost non-tax revenues and maintain its IMF programme. The decision is seen as a balancing act between fiscal consolidation and environmental responsibility.
