Petroleum levy increase expected from July 1 amid IMF deal

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Approximately Rs. 5 increase in the Petroleum Development Levy (PDL) on petrol and diesel is anticipated to take effect on July 1, 2023, according to reports.

This is expected amid the revived hopes for a more comprehensive agreement with the International Monetary Fund (IMF).

The ninth review of the $6.5 billion Extended Fund Facility (EFF) program, which is set to expire tomorrow (Friday), has fewer and fewer chances of being completed, so Pakistan and the IMF would have to agree to a new bailout package under the Standby Arrangement (SBA) of $2.5 billion for the subsequent six to nine months.

According to the report, the government is considering raising the petroleum tax from Rs. 50 to Rs. 55 per liter of petrol and diesel in an effort to get closer to finalizing the lender’s new SBA program, which is necessary to avoid a balance of payments crisis and default over the next six months.

The government will have to increase the PDL at the start of the following fiscal year even if it manages to get the IMF accord.

The Petroleum Products (Petroleum Levy) Ordinance, 1961 (XXV of 1961), which gives it the authority to increase the petroleum levy, was amended by the government through the Finance Act 2023-24.

In the past, the parliament had to approve setting the petroleum levy cap.

In contrast to the revised target of Rs542 billion for the current fiscal year 2022–23 ending on June 30, the Ministry of Finance has now informed the Senate Standing Committee on Finance that the petroleum development levy was calculated at Rs60 per liter for achieving its target of Rs879 billion in the next fiscal year.