Prime Minister Shehbaz Sharif announced on March 15, 2025, a significant policy shift, raising the petroleum levy by Rs10 per litre—a 17% increase—to Rs70 per litre, while maintaining petrol and high-speed diesel prices unchanged at Rs255.63 and Rs258.64 per litre, respectively. This move, detailed by officials from the finance and energy ministries, creates fiscal space to reduce electricity prices by approximately Rs1.50 per unit, offering relief to households and industries grappling with high power tariffs, as reported by The Express Tribune.
The decision, effective immediately, opts not to pass on a potential reduction in global oil prices—due on March 16—to consumers, instead channeling the savings into lowering electricity costs. The prime minister emphasized, “We have decided to maintain petroleum prices at their current levels and transfer the full financial benefit to the public by reducing electricity prices.” He added that this measure is part of a broader strategy to achieve meaningful reductions in electricity tariffs, with a detailed relief package to be announced on March 23, 2025.
The Rs10 per litre hike in the petroleum levy, approved by the prime minister on a finance ministry summary, is expected to generate approximately Rs180 billion annually. This additional revenue will fund the electricity price reduction, initially estimated at over Rs1.50 per unit, with potential further cuts pending adjustments for negative fuel price adjustments from previous months, according to government officials. However, the International Monetary Fund (IMF) rejected the government’s request to lower the General Sales Tax (GST) on electricity bills, limiting the scope of relief, as noted in a recent economic report.
Federal Minister for Petroleum Ali Pervaiz Malik explained to The Express Tribune that this trade-off addresses the burden of high electricity bills, which exceed Rs65 per unit for residential consumers due to idle capacity payments (Rs18 per unit), cross-subsidies for high-usage consumers, and costs of inefficiency and theft embedded in tariffs. The prime minister has tasked Power Minister Sardar Awais Leghari with developing a proposal to reduce electricity prices by Rs6–7 per unit, aiming to alleviate financial strain on households and industries.
Petrol, primarily used in private transport, small vehicles, rickshaws, and two-wheelers, directly impacts the budgets of middle and lower-middle-class families, while high-speed diesel powers most transport and agriculture sectors. Despite the levy increase, Pakistan’s petrol price of 91 cents per litre (at US dollar parity) remains among the cheapest regionally—compared to $1.15 in India, $1.26 in Sri Lanka, and $1.04 in Bangladesh—though a weaker rupee inflates costs for consumers. Diesel, at 92 cents per litre, is also competitive, but lower per capita income limits affordability, as highlighted in a government comparison.
After the hike, total taxes on petrol have risen to approximately Rs86 per litre, including the Rs70 per litre petroleum levy and a 10% excise duty at the import stage. Kerosene oil and light diesel oil prices remain unchanged at Rs168.13 and Rs153.34 per litre, respectively, while industry projections suggested potential price reductions of Rs14.16 per litre for petrol, Rs8.70 for diesel, Rs10.33 for kerosene, and Rs7.12 for light diesel, based on falling global oil prices—savings the government chose not to pass on.
The prime minister reiterated his government’s commitment to prioritizing public relief since taking office, using fiscal space from global oil price drops and other measures to provide significant electricity cost reductions. However, this decision has sparked debate, with critics arguing it shifts the burden to fuel consumers while addressing electricity woes, as reported in a Dawn analysis.
Other petroleum products, including kerosene oil and light diesel, maintain their current prices until the end of March 2025, as per the government’s directive. For the latest updates on petroleum and electricity pricing policies, follow government announcements, energy ministry reports, or economic news platforms.
