Pakistan to Remove Cap on Petroleum Development Levy, Set to Raise Over Rs. 100 per Liter in FY 2025-26
The federal government of Pakistan has decided to lift the cap on the Petroleum Development Levy (PDL), allowing it to charge more than Rs. 100 per liter on petroleum products such as petrol and diesel. This move aims to generate Rs. 194 billion in revenue during the fiscal year 2025-26 to help bridge the Federal Board of Revenue’s (FBR) widening revenue gap.
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- The current PDL stands at Rs. 78 per liter, increased from Rs. 60 in July 2024, and has already generated over Rs. 1 trillion in tax revenue in the first 10 months of the ongoing fiscal year.
- For FY25 (July 2024 to March 2025), Rs. 833.8 billion has been collected through the PDL, compared to Rs. 1,019 billion in FY24 and Rs. 580 billion in FY23.
- This new levy level will be the highest in Pakistan’s history and will also support power sector subsidies and the emerging electric vehicle industry.
Energy Sector Reforms and IMF Agreement
- The government has agreed with the IMF to remove the 10% cap on the Debt Service Surcharge (DSS) charged on electricity bills, a step aimed at reducing circular debt in the energy sector.
- Legislation to lift the DSS cap is expected by June 2025.
- Pakistan plans to achieve net-zero circular debt flow by FY 2025 through tariff adjustments, targeted subsidies, and cost-reduction reforms.
- Quarterly tariff adjustments and monthly fuel cost revisions will continue to prevent further circular debt accumulation.
- A comprehensive Circular Debt Management Plan for FY 2026 will be submitted for cabinet approval by July 2025.
- All provinces have agreed not to introduce new subsidies on electricity or gas, reinforcing the government’s commitment to financial sustainability in the energy sector.
