The federal government has doubled the climate support levy on petroleum products effective July 1. Officials increased the levy from Rs. 2.50 per liter to Rs. 5 per liter on both petrol and high-speed diesel. The government implemented this change as part of fiscal measures under the Finance Act 2026 and commitments linked to the IMF program.

An official notification confirms the adjustment affects both fuels simultaneously. The government introduced this measure as part of Pakistan’s broader fiscal reforms and climate financing commitments.

To offset the increase, officials reduced the Petroleum Levy on both fuels. The government cut the Petroleum Levy on petrol from Rs. 66.66 per liter to Rs. 64.14 per liter. Meanwhile, they reduced the levy on high-speed diesel from Rs. 79.97 per liter to Rs. 70.04 per liter. Therefore, the government restructured the tax burden rather than increasing it overall.

Officials have revised the overall tax structure on petroleum products. They replaced part of the Petroleum Levy with the new tax rather than adding an equivalent new burden. Additionally, the reshuffle maintains affordability for consumers. Consequently, retail prices of petrol and high-speed diesel remain unchanged, as an equivalent reduction in the Petroleum Levy fully offsets the increase.

The government introduced this measure under the Finance Act 2026 as part of Pakistan’s climate financing commitments. The measure aims to generate dedicated revenue for climate-related initiatives. Moreover, it aligns Pakistan’s tax framework with reforms that officials agreed under the IMF program. Therefore, the policy serves multiple objectives simultaneously.

This restructuring reflects Pakistan’s commitment to environmental sustainability while managing fiscal constraints. Dedicated climate funding becomes increasingly important as global temperatures rise. The IMF program includes environmental commitments that require revenue mobilization. So the adjustment represents pragmatic policy design. Finally, keeping retail prices stable while improving climate financing demonstrates government commitment to both economic stability and environmental protection.