IN FY2022–23, Pakistan collected Rs580 billion from its citizens through the petroleum levy.
It then handed Rs487 billion as capacity payments to the IPPs—for power plants kept on standby, whether electricity was consumed or not. This is not a coincidence. It is a system. Capacity payments have since quadrupled to Rs2 trillion. The petroleum levy has more than quadrupled: Rs20 per litre in 2022, Rs103 today. Rs580 billion collected then, Rs1,500 billion now. Still not a coincidence. Still a system. And still your pocket.
Imagine: Rs20 per litre in 2022, Rs103 today. Petroleum levy moving from Rs20 per litre to Rs103 is not the result of global commodity prices, not the consequence of a weak rupee, not an unfortunate side effect of external shocks. Petroleum levy moving from Rs20 per litre to Rs103 is a government decision, made weekly, in a notification, without a parliamentary vote. This is inflation by design. This is, in the precise meaning of the term, structural inflation.
This is how petroleum levy shows up as structural inflation in every Pakistani kitchen: kerosene oil up 155 percent, onions up 42 percent, vegetables up 36 percent, atta up 31 percent. Not estimates. Not market gossip. Year-on-year figures from the Pakistan Bureau of Statistics (PBS). Petroleum levy once had a statutory ceiling – the Finance Act 2025 quietly removed that ceiling. That cap is now gone. The executive can set the petroleum levy at any rate it chooses, by notification, without a vote, without debate, without accountability. This means the tax that is eating your kitchen budget is no longer subject to any legal limit. It can go to Rs200. It can go to Rs300. There is no law that says it cannot.
Petroleum levy is a tax without a ceiling, imposed without a vote, on the necessities of the poor, to pay guaranteed returns to the rich. This is not fiscal policy – it is extraction by executive order. Petroleum levy is Rs1,468 billion extracted from the motorcycle rider, the flour buyer, the kerosene user — to finance a state drowning in losses, leakages and unchecked expenditure.
Petroleum levy’s rise from Rs20 per litre in 2022 to Rs103 today points toward a dangerous structural shift: Pakistan is increasingly becoming a petrol-pump funded state. What was once a supplementary tax has now become a mechanism to finance mounting capacity payments, circular debt and losses embedded within the power sector.
Imagine: Every litre sold at the pump now helps sustain a system where Independent Power Producers (IPPs) are paid billions in guaranteed payments — whether electricity is consumed or not. Instead of reducing transmission losses or fixing inefficiencies in the energy chain, the burden is transferred to the consumer. The motorcycle rider, the farmer, the transport worker and the ordinary household increasingly finance the cost of an unreformed power structure through every litre they buy.
Petroleum levy didn’t rise because oil became expensive. It rose because IPP capacity payments started exploding. Because circular debt spiralled out of control. Because power-sector obligations became too large for the government to finance any other way.
Imagine: Petroleum levy is now larger than the federal Public Sector Development Program (PSDP). Pakistan now has a government that is living off the petrol pump. Every litre sold finances a government unwilling to reform itself. The fuel tank has quietly become the treasury. Behind every rise in petroleum levy lies another unpaid bill from the power sector.
—The writer is a journalist and
political analyst.
