ISLAMABAD (Kashmir English): Consumers in Pakistan are likely to be hit with higher fuel prices in the next fiscal year. The government is proposing a double increase in the carbon levy on petroleum products from Rs2.50 per litre to Rs5 per litre beginning from July 1, 2026.
This proposal is in the pipeline and a part of the federal budget for FY2026-27, according to sources familiar with budget preparation and the officials involved in the preparation of the federal budget. They confirmed the proposal and indicated it is primarily driven by the country’s financial compulsions as well as climate change policy goals.
In the current budget, a carbon levy of Rs2.50 per litre was imposed on petroleum products, and the government now proposes to more than double it to Rs5 per litre in the new fiscal year from July 1, 2026.
It was informed by the sources that it was the maximum that would have to be imposed according to the previous budget, and now the government is all set to charge the full amount. As a consequence, the fuel prices might see some additional hike.
The government claims that the proposed increase in carbon levy would not only boost its revenues but also reflect the commitments it made towards environmental policy. They indicated that the current proposal would also help bolster budget targets for the coming year.
Meanwhile, the consumer would bear the brunt in the shape of an increase in their daily expenditure related to transportation and power energy, sources informed, and expect the fuel prices to be revised upwards once the levy is actually applied.
The details are likely to be unveiled in the federal budget for FY2026-27.
