ISLAMABAD: The recent dramatic reduction in fuel prices has brought little relief from the heavy burden of taxation, as government levies continue to account for nearly a third of what consumers pay at the pump. Internal documents from the Petroleum Division reveal that taxes still make up 29% of the retail price for both petrol and diesel, effectively muting the impact of the government’s latest relief measure.
On Saturday, the administration slashed the price of petrol by Rs74.28 per litre and diesel by Rs67.31 per litre, setting new rates at Rs299.50 and Rs311.47 respectively. However, a detailed breakdown of the cost structure obtained by Geo News shows that the taxman remains the single largest beneficiary of every litre sold.
Tax Breakdown: The Invisible Surcharge
According to the official data, the current price of petrol carries a hidden tax load of Rs88.07 per litre. This fiscal burden is constructed from three distinct components:
- Petroleum Levy: Rs66.25 per litre, forming the dominant share of the tax structure.
- Customs Duty: Rs19.32 per litre.
- Climate Support Levy: Rs2.50 per litre.
The situation is even more pronounced for diesel, where total taxes amount to Rs91.15 per litre. The diesel tax structure breaks down as a petroleum levy of Rs72.97, customs duty of Rs15.68, and the same Rs2.50 climate support levy.
This persistent tax pressure comes despite a volatile period for global energy markets. The government shifted to a weekly fuel price review mechanism on February 28, following the eruption of the US-Israeli conflict with Iran. That conflict sent prices on a wild trajectory: petrol skyrocketed from Rs258.17 to a peak of Rs458.41 per litre before settling above Rs370 just days ago. Diesel followed a similar arc, spiking from Rs275.7 to Rs520.35 per litre.
A Fragile Peace and Political Promises
The latest price cut was announced by Prime Minister Shehbaz Sharif after the United States and Iran signed an interim peace deal, a diplomatic breakthrough mediated by Pakistan. The Prime Minister framed the reduction as the fulfillment of a political promise to the nation. Yet, with the petroleum levy remaining untouched as a primary revenue engine for the government, the structural cost of fuel in Pakistan remains heavily skewed towards taxation rather than the base price of oil.
