The federal government has significantly increased the petroleum levy on petrol, raising it by Rs24.74 per litre despite announcing a reduction in petrol prices. The latest move has sparked attention as a substantial portion of the benefit from lower international oil prices appears to have been absorbed through higher taxation.
Under the latest fuel price notification, the ex-depot price of petrol was reduced by Rs4 per litre, bringing it down from Rs381.78 to Rs377.78 per litre. Meanwhile, the price of high-speed diesel remained unchanged at Rs380.78 per litre. This marks the fourth consecutive reduction in petrol prices, with cumulative cuts of approximately Rs37 per litre over recent weeks.
However, alongside the reduction in retail fuel prices, the government increased the petroleum levy on petrol from Rs91.34 per litre to Rs116.08 per litre. The increase of Rs24.74 per litre strengthens government revenue collection at a time when authorities are seeking to maintain fiscal stability and meet budgetary targets.
The government also revised levy rates on other petroleum products. The petroleum levy on high-speed diesel was reduced from Rs68.93 per litre to Rs44.59 per litre, a decrease of Rs24.34 per litre. Meanwhile, the levy on kerosene oil remained unchanged at Rs20.36 per litre, although the retail price of kerosene was increased by Rs8.70 per litre to Rs280.70 per litre.
According to recent reports, the overall tax burden on petrol already stood at approximately Rs125 per litre, including petroleum levy, customs duties, and climate-related charges. The latest increase further enhances the role of petroleum taxation as a major source of non-tax revenue for the government.
Analysts believe the decision reflects the government’s strategy of using fuel taxes to support revenue generation while cushioning the fiscal impact of fluctuations in international oil prices. As a result, consumers are receiving only part of the relief generated by declining global oil prices, while a larger share is being redirected toward government revenue collection.
Also read: Government Cuts Petrol, Diesel Prices by Rs22 Each
