Rs. 2.5/liter carbon levy tax on petrol and diesel is planned to introduce a new tax. It will be imposed in the upcoming budget for fiscal year 2025-26 by the government. This new tax is expected to be executed with the petroleum levy tax and will raise up to 45 billion rupees to boost revenue this year.
A carbon levy is a tax that prohibits companies and consumers from polluting and other climate-changing activities. The collected tax will be used in green budgeting initiatives. These initiatives include environmental protection, producing renewable energy, restoring resources, and decreasing emissions.
Moreover, the carbon levy tax will not be applicable to LDO (light diesel oils) and kerosene. The government expected to increase the carbon levy tax up to PKR 5 per liter on petrol and diesel in fiscal year 2026-27 to raise 90 billion rupees for revenue.
The IMF (International Monetary Fund) suggested these legislations for the fiscal year budget of 2025-26 during negotiations. There will be no other measures for the carbon levy tax in the new budget, but it will be added under budgetary provisions. However, this new carbon levy tax could increase the prices of petroleum.
