Contrary to expectations, built no less by the government in the Budget, petroleum prices for the first fortnight of FY25 were revised without any changes in Petroleum Levy (PL). Recall that the Finance Bill (now Act) envisages a Petroleum Levy maximum limit at Rs70//ltr on both HSD and petrol, revised down from the earlier announcement of Rs80//ltr on June 12, 2024. Of course, the limit does not mean it will go into effect at once, and there is always room to catch up down the road.

However, the budgeted target of Rs1.28 trillion does necessitate higher PL than what is currently in place or a marked improvement in petroleum product sales. Mind you, the FY25 budgeted target is a massive 47 percent higher than last year’s Rs869 billion and 33 percent higher than the expected Rs960 billion. In simple terms, the combined petrol and HSD sales for FY25 will have to be a little over 18 billion liters for the target to be met at maximum PL imposition throughout the year.

How tall a task is that? Only once have the combined HSD and petrol sales for a fiscal year surpassed 18.3 billion liters (FY18:19.6 bn ltr). The combined sales for FY24 are projected at 16 billion liters, that too if the last two months reverse the trend and post better year-on-year growth figures. A 15 percent year-on-year increase in sales for FY25 is thus required for the Rs1.28 trillion target to be met, assuming Rs70/ltr PL throughout.

There is always room for improvisation and if pushed against the wall, there is no stopping the authorities revise the maximum PL limit. Conversely, to keep the primary surplus target on track, the axe can always fall on the Public Sector Development Program (PSDP) spending – which many observers believe has been budgeted at unrealistically high levels for FY25. Be that as it may, the PL target for FY25 as it stands is a tall order and would likely be missed sizably, unless, of course, international oil prices change for the better, offering enough room for the government to impose a higher levy and hope for increased demand.

All this while, Pakistan continues to lose hundreds of billions of rupees in taxes due to the rampant smuggling of POL products – particularly HSD. As per an estimate arising from the 2021 Oil Inquiry Commission Report – the tax loss runs close to Rs250 billion per annum due to smuggling. Mind you, that estimate was based on the then prevalent taxes, which have increased significantly since, and the loss would now be close to Rs400 billion. For the skeptics, explain how high-speed diesel demand in the country sits at the lowest since 2010 – for an economy that has undoubtedly grown manifolds during the same period.