Tax on Diesel Increased By Rs. 28.7/Litre in Late Night Surprise, Petrol Levy Cut

The federal government has imposed a fresh petroleum levy of Rs. 28.7 per litre on high-speed diesel, while slightly reducing the levy on petrol, in a late-night notification issued by the Petroleum Division effective May 1, 2026.

High-speed diesel (HSD) (which previously carried zero petroleum levy) will now be subject to a levy of Rs. 28.69 per litre.

In contrast, the government reduced the petroleum levy on petrol by Rs. 3.88 per litre, bringing it down from Rs. 107.38 to Rs. 103.50 per litre.

The revised levy structure applies to multiple petroleum products as Islamabad continues to depend heavily on fuel levies as a key revenue source amid fiscal pressures and persistent tax collection challenges faced by the Federal Board of Revenue (FBR).

Officials say petroleum levies provide guaranteed revenue because they are collected at the fuel pricing stage, making them far easier to recover compared to conventional taxes that rely on compliance and enforcement.

The increase in diesel levy is expected to have wider economic consequences since diesel is the primary fuel used in freight transport, agriculture machinery, and industrial supply chains. Higher diesel taxation typically feeds directly into food prices, transport fares, and overall inflation.

Meanwhile, the modest reduction in petrol levy is likely to offer limited relief largely confined to private vehicle users.

The notification also confirms petroleum levy rates on other fuels, including premium gasoline, kerosene, light diesel oil, and furnace oil, alongside the continuation of the Climate Support Levy on selected products.