Pakistan plans to increase taxes on petroleum products

The government plans on increasing tax rates on petroleum products to contain more than Rs3 trillion circular debts in the gas sector instead of changing the gas tariff as determined by the Oil & Gas Regulatory Authority (OGRA). While testifying before the National Assembly's Standing Committee on Petroleum, Petroleum Minister Ali Pervaiz Malik on Tuesday said the government was not increasing the gas tariff from January 1 on the instructions of Prime Minister Shehbaz Sharif. The meeting was presided over by Syed Mustafa Mahmood, MNA.

The minister confirmed that the gas circular debt was over Rs3 trillion, including late payment surcharge. Mr Malik, however, deflected repeated questions from lawmakers about proposals for increasing the petroleum levy by Rs5 per liter on petrol and diesel to cover the circular debt, saying a separate briefing could be arranged on the subject, reports Dawn.

Interestingly, there are only 10 million gas consumers in the country compared to petrol and diesel which are consumed by almost the entire population. Of late, the government has been increasing the petroleum levy, currently up to Rs82 per liter, on the pretext of providing a subsidy to power consumers and building roads in Balochistan, in addition to using the levy as one of the leading general revenue sources for the Centre.

In the last week of November 2025, OGRA had determined up to 7pc (Rs118 per unit) increase in the prescribed price of natural gas to meet about Rs886bn revenue requirement of the two gas companies during fiscal year 2025-26. Under the law, the government has to make a decision on consumer-end gas prices based on OGRA's determination within 40 days.

The minister, however, said the price would not be increased for the next six months and pointed out reforms to curb gas theft and losses, besides a diversion of surplus LNG cargoes to the international market. He said Pakistan had concluded successful negotiations with Qatar to divert surplus LNG cargoes to global markets. He said a mutually acceptable arrangement had been reached to manage excess supplies.

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