Why is Petrol so expensive in Pakistan?

ISLAMABAD: Although imported petrol reaches Pakistan at an estimated landed cost of Rs195–196 per litre, consumers end up paying Rs335–350 per litre at petrol pumps. The difference comes from government taxes, petroleum levy, climate levy, transportation costs, and the margins of oil companies and petrol dealers.

According to the available cost breakdown, customs duties and port-related charges add around Rs17–18 per litre as soon as the fuel arrives at the port. Further costs are then added through transportation, distribution, dealer commissions, and government-imposed levies.

The largest share of the final retail price comes from government taxes and levies. The government currently collects Rs80 per litre as petroleum levy and an additional Rs5 per litre under the Climate Change Support Fund on petrol.

Oil Marketing Companies (OMCs) receive a margin of around Rs16.50 per litre, while Rs7.16 per litre is charged as freight cost. Petrol pump dealers receive a margin of approximately Rs9.50 per litre, following an increase approved after negotiations with the government.

Overall, local taxes and margins on petrol amount to approximately Rs108.67 per litre, while diesel carries total taxes and margins of around Rs96.86 per litre.

Petrol Price Breakdown (Per Litre)

Diesel Cost Breakdown (Per Litre)

According to estimates, Pakistan has more than 25 million motorcycles, and a person consuming 2–3 litres of petrol daily may effectively contribute around Rs18,000–20,000 per month in petroleum-related taxes and levies. The revenue collected is deposited into the national treasury and is used to finance government expenditures, development, and the overall functioning of the state. However, economists say higher petroleum taxes also increase transportation costs, contributing to inflation across the economy.