Petrol Levy Cut as Refineries Absorb Rs14.71 a Litre
The government has shifted the impact of higher petrol import costs to local refineries to prevent an increase in prices for consumers. The move is set out in the latest petroleum price notification, effective 31 October 2026, and analysed in a research note by Topline Research.
The import premium on petrol, including freight, rose from $19.88 per barrel to $25.52 per barrel. That rise added about Rs14.71 per litre to petrol costs. Instead of passing the increase to motorists, the government cut the petroleum levy charged at the pump and placed the burden on refineries.
The notification lists the total petrol price at Rs377.91 per litre, excluding secondary freight. Petrol remains exempt from sales tax.
How the levy adjustment works
The pricing notification sets the petrol price before the petroleum levy, the climate support levy and sales tax at Rs307.62 per litre. The government’s notified petroleum levy is Rs80 per litre. The document separately records a levy adjustment of minus Rs14.71 per litre through refineries.
The result is a direct petroleum levy of Rs65.29 per litre, which is the amount charged to oil marketing companies. The notification states that the Rs14.71 per litre impact, calculated against estimated total countrywide petrol volumes, will be surrendered through refineries at Rs49.02 per litre on their sales to oil marketing companies.
The higher per-litre figure for refineries reflects a simple fact. Local refineries supply about 30 per cent of Pakistan’s motor spirit, or petrol. Because the cost is absorbed by a smaller share of total petrol supply, rather than spread across all sales, the burden per litre on refinery sales is larger.
The full price build-up
The notification’s own components add up exactly to the listed pump price. That arithmetic is worth setting out, because it shows where the adjustment sits and where it does not.
| Price component | Amount per litre |
|---|---|
| Ex-refinery or import price | Rs282.26 |
| Inland Freight Equalization Margin | Rs7.51 |
| Oil marketing company margin | Rs7.87 |
| Dealer margin | Rs9.98 |
| Price before levies | Rs307.62 |
| Direct petroleum levy (after Rs14.71 adjustment) | Rs65.29 |
| Climate support levy | Rs5.00 |
| Total petrol price | Rs377.91 |
The government’s adjustment appears only in the petroleum levy line. It does not change the ex-refinery price, the freight margin, the oil marketing company margin or the dealer margin.
Two points are worth noting. First, the climate support levy of Rs5 per litre stays in place. Second, petrol carries no sales tax in this notification.
Refineries could face Rs10-15 billion a month
Topline Research estimates that the arrangement could impose a financial burden of Rs10 billion to Rs15 billion per month on refineries. That estimate assumes annual motor spirit production of 2.6 million tonnes.
The brokerage said the estimate is preliminary and remains subject to further confirmation. It is following up with refineries for more detail and may issue an update if required.
That caution matters. The monthly figure is an analyst estimate, not a government figure, and it rests on a production assumption that could change. What is confirmed in the notification itself is the mechanism: a Rs14.71 per litre cost, absorbed through refineries, with the direct levy cut to Rs65.29 per litre.
What it means for motorists
For motorists, the immediate effect is that pump prices do not rise on account of the higher import premium. The government has chosen to absorb the increase inside the levy and refinery channel, rather than pass it to consumers at the pump.
The longer question is how long refineries can carry a cost of this size. A burden of Rs10 billion to Rs15 billion a month, if it continued, would test refinery margins and could surface in later pricing rounds or in representations to the government.
Frequently asked questions
Why did the government cut the petrol levy?
The import premium on petrol rose from $19.88 to $25.52 per barrel, adding about Rs14.71 per litre in costs. The government cut the direct levy from Rs80 to Rs65.29 per litre so that motorists would not face the increase.
What is the petrol price now?
The notification lists petrol at Rs377.91 per litre, excluding secondary freight. That figure includes the direct levy of Rs65.29 and a climate support levy of Rs5, with no sales tax.
Why do refineries pay Rs49.02 a litre when the cost is Rs14.71?
The Rs14.71 figure is calculated across all petrol sold in the country. Refineries supply only about 30 per cent of that petrol, so the same total cost works out to Rs49.02 per litre on refinery sales alone.
Is the Rs10-15 billion monthly burden confirmed?
No. It is a preliminary estimate by Topline Research, based on assumed annual motor spirit production of 2.6 million tonnes. The brokerage said it is subject to further confirmation.
