The Petroleum Division has formally opposed any upward revision in petroleum levy targets for the upcoming fiscal year in its latest budget recommendations submitted to the Ministry of Finance. Citing highly elevated global oil prices, the division has actively proposed slashing the annual collection goal to one trillion rupees while lowering the current levy on both petrol and diesel to fifty rupees per liter. According to institutional officials, Petroleum Minister Ali Pervaiz Malik recently communicated these points directly to Finance Minister Muhammad Aurangzeb, explaining that the ongoing United States-Iran conflict and escalating global energy prices have made it absolutely imperative to scale back the state’s reliance on petroleum levies to safeguard vulnerable segments of society.
The financial architecture proposed by the division aims to significantly ease the burden on the domestic economy. The recommended one trillion rupee levy collection target for the next fiscal year sits a massive 727 billion rupees lower than the target originally projected by the International Monetary Fund, and runs 468 billion rupees below the initial target established for the current fiscal year. As a direct alternative intervention, the division has strongly advocated for capping the petroleum levy on petrol and high-speed diesel at fifty rupees per liter, moving completely away from the eighty rupees per liter baseline previously agreed upon with the international lender.
Internal data reveals that the government has been charging an elevated 118 rupees per liter as a petroleum levy on petrol. To manage future price volatility, the division has suggested a structured mechanism where levy rates should only be permitted to climb above the fifty rupees per liter threshold if international crude oil benchmarks tumble below sixty dollars per barrel. According to the formal budget documentation, domestic diesel prices have surged by forty-eight percent and petrol prices have climbed by nearly fifty-six percent since the regional conflict erupted, primarily because the state adjusted domestic rates to match international prices while aggressively pursuing higher tax collections.
The Petroleum Division has strongly argued that lowering these heavy levy targets and immediate tax rates is an absolute necessity to relieve intense pressure on everyday consumers and lay the groundwork for broader economic stability. Statistical data compiled by state officials highlights the massive tax burden borne by the public over recent years, showing that the estimated cumulative levy collection between July 2022 and June 2026 is projected to stand at a staggering 4.3 trillion rupees.
Beyond vehicular fuels, the budget proposals focus heavily on providing relief through alternative energy channels. The division has urged the federal administration to roll back the sales tax on Liquefied Petroleum Gas from eighteen percent down to ten percent, pointing out that this specific fuel is a vital necessity widely utilized by low-income households for everyday cooking. Consequently, the division recommended that petroleum levy targets on this specific gas product should remain completely frozen in the upcoming financial plan.
Simultaneously, the budget submission aims to tackle a web of legacy financial blockages that are currently suffocating major state-owned enterprises, particularly Pakistan State Oil, by requesting direct budgetary allocations and demanding an end to cross-subsidies on gas pricing. The documentation underscores that local oil and gas exploration and distribution firms are currently wrestling with immense tax burdens, delayed state refunds, and aggressive tax demands that are collectively degrading the financial viability of the entire energy sector.
To restore corporate liquidity, the division has requested the Federal Board of Revenue to swiftly clear fifty-five billion rupees in long-pending tax refunds legally owed to Sui Northern Gas Pipelines Limited. Furthermore, officials noted that the Sui gas utilities are facing 182 billion rupees in disputed tax demands stemming from the operational swapping of imported and domestic gas within the Sui Southern Gas Company system. To eliminate this bureaucratic bottleneck, the Petroleum Division has recommended targeted amendments to existing sales tax laws within the upcoming budget text.
To insulate the public from further inflation, the finance ministry has been asked to allocate 130 billion rupees strictly for gas subsidies in the fiscal year 2026-27, rather than shifting the financial burden directly onto residential consumers through higher gas tariffs. Additionally, the division has requested comprehensive budgetary coverage to absorb the heavy financing costs incurred by Pakistan State Oil on its petroleum imports, including substantial exchange rate losses. To clear up these balance sheet distortions, the state-backed oil marketing company is actively seeking the liquidation of sixty-one billion rupees in arrears linked directly to import-related loans. Finally, the division has proposed the complete abolition of the ten percent super tax currently imposed on oil and gas companies, arguing that the tax is severely harming corporate profitability and stripping away the investment capacity needed for infrastructure development.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.