Petroleum Levy becomes regular revenue source, Senate committee questions government

The National Assembly Standing Committee on Petroleum has questioned the growing burden of the petroleum levy on consumers,

Islamabad: The National Assembly Standing Committee on Petroleum has questioned the growing burden of the petroleum levy on consumers, noting that a charge originally introduced to absorb changes in fuel prices has now become a regular source of government revenue.
The committee, chaired by Syed Mustafa Mehmood, MNA, said members have the right to question the basis and justification of the levy and called for greater clarity about its effect on the final prices paid by consumers.

The issue came up during a detailed review of petrol and gas prices, the performance of Pakistan State Oil and Oil and Gas Development Company Limited, refinery operations, petroleum smuggling and problems in the gas sector.

Officials told the committee that the international petroleum market is facing an unprecedented crisis involving crude oil, refined petroleum products, shipping, insurance and refining capacity. Higher shipping and insurance costs, longer transportation routes and unusually high differences between crude oil and refined product prices have sharply increased the international cost of petroleum products.

The Minister for Petroleum Division told the committee that the government was taking all possible measures to maintain uninterrupted fuel supplies and reduce the effect of the international price shock on domestic consumers.

The Oil and Gas Regulatory Authority explained the mechanism used to determine petrol and diesel prices. OGRA said the existing formula is publicly available on its website and uses international market prices along with relevant Pakistan State Oil data.

The basic price of petrol and diesel is calculated using a seven day rolling average, the applicable exchange rate and other required components. The committee stressed the need for greater transparency and public understanding of the final price of fuel, including taxes, levies, transportation costs and international market benchmarks.

The committee also reviewed refinery operations and plans to increase local production. The Minister for Petroleum Division said four of the five refineries had signed agreements for upgrading their facilities, while negotiations with the remaining refinery were still continuing.

The government is coordinating with refineries to increase domestic production and reduce dependence on imported refined petroleum products. However, the committee raised concern over the production of petroleum products containing higher levels of sulphur and their possible effects on the environment during the coming smog and winter seasons.

Petroleum smuggling was also discussed. Officials told the committee that border controls were being strengthened to stop illegal fuel trade. The Petroleum Division said complete digital monitoring of the petroleum supply chain could provide a long term solution by helping authorities identify differences between the quantities entering the system and the quantities being sold.

The committee also examined major gas sector issues, including gas prices, revenue requirements and the circular debt of SNGPL and SSGC. OGRA explained the difference between prescribed prices, consumer prices and revenue requirements.

The regulator also informed the committee that the outstanding amounts of SNGPL and SSGC needed reconciliation. The committee directed officials to provide exact and updated figures showing the liabilities and revenue shortfalls of both gas companies at the next meeting.

The National Assembly committee also decided to take up the Universal Gas Distribution Company and the commercial sale of gas under the new policy as a special agenda item at its next meeting.

A representative of UGDC will be asked to explain its approval, gas procurement and sale system, customers, pricing, transportation arrangements, use of SNGPL and SSGC infrastructure and applicable regulatory requirements.

The possibility of providing cheaper fuel to farmers through Light Diesel Oil was also discussed. The committee said the proposal could provide benefits to the agriculture sector but warned that proper safeguards would be needed to prevent misuse, diversion and loss of government revenue.

The Secretary Petroleum Division was directed to conduct the necessary research and provide details about the proposal at the next meeting.

The committee also discussed the petroleum levy in greater detail. Officials clarified that the levy is treated as non tax revenue and is separate from customs duty and other taxes, although it forms a major part of petroleum prices.

Members noted that the levy was initially intended to absorb fluctuations in petroleum prices but has later become a regular source of government revenue. The chairman stressed that members have the right to question the basis of the levy and called for clearer information about how it affects consumers.

The committee also discussed gas facilities for communities living within a five kilometre radius of oil and gas wells. Members stressed the need to provide benefits and incentives to local communities living close to gas producing areas.

The Secretary Petroleum Division informed the committee that Rs1 billion had been allocated for the current year for such schemes. Of this amount, 70 percent was proposed for SSGC and 30 percent for SNGPL for phased implementation.

The committee directed that the matter be placed on the agenda of its next meeting and that officials provide details of earlier decisions, progress on implementation and the use of the allocated funds.

At the beginning of the meeting, a member also raised concern over the late circulation of briefing papers. He said members should receive the relevant documents at least three days before meetings so they can properly study the issues.

The Petroleum Division accepted the concern and assured the committee that the required documents would be circulated within the prescribed time in future.

The committee also agreed to defer consideration of the Natural Gas Development Surcharge Amendment Bill 2026 and the Gas Infrastructure Development Cess Amendment Bill 2026 until the next meeting.