Budget 2026-27: Climate support levy on Petrol, diesel likely to double

ISLAMABAD: The federal government is likely to increase the Climate Support Levy on petrol and high-speed diesel in the upcoming Budget 2026-27, a move that could directly impact fuel prices across the country.

According to sources, the government is considering expanding taxation measures on petroleum products as part of efforts to meet fiscal targets and commitments linked to its economic reform programme.

Under the proposal, the Climate Support Levy on petrol and high-speed diesel may be increased by Rs2.50 per litre, raising the levy from the current Rs2.50 per litre to Rs5 per litre.

Officials said the levy was introduced during the current fiscal year as part of measures aimed at supporting climate-related initiatives and fulfilling conditions agreed with international financial institutions, including the International Monetary Fund (IMF).

If approved, the increase would add to the overall tax burden on petroleum products and could influence retail fuel prices in the coming fiscal year.

At present, consumers already pay a Climate Support Levy of Rs2.50 per litre on both petrol and diesel. The proposed increase would effectively double the charge to Rs5 per litre.

Economic analysts warn that higher taxes on fuel could have wider implications for the economy, potentially increasing transportation costs and contributing to inflationary pressures after the budget.

The final decision will be made when the federal government unveils and approves the Budget 2026-27.