Although the federal government recently reduced petrol prices by Rs7.45 per litre, the relief has been largely negated due to a simultaneous increase in petroleum levies. Effective from August 1, 2025, the revised fuel pricing structure includes several hidden charges, raising the effective tax burden on consumers to approximately Rs100 per litre.
According to official sources, the petroleum levy on both petrol and diesel has been increased by Rs2.55 per litre. This adjustment brings the total petroleum levy to Rs78.02 per litre on petrol and Rs77.01 per litre on diesel. The increase came into effect alongside the updated fuel prices and reflects the government’s approach to maintaining revenue targets despite easing global oil prices.
In addition to the petroleum levy, a climate support levy of Rs2.50 per litre remains applicable on both fuel types. Although relatively minor, this additional charge contributes further to the financial strain on motorists.
Adding to the consumer cost is the freight margin on diesel, which has been increased by 20 paisas, now standing at Rs6.24 per litre. Furthermore, both petrol and diesel include dealer and distributor margins, set at Rs8.64 and Rs7.87 per litre respectively,pushing retail prices higher.
Despite these cumulative charges, the government has maintained a 0% sales tax on petroleum products. However, industry estimates suggest that consumers are effectively paying around Rs100 per litre in combined taxes, levies, and associated margins. This renders the overall price of petrol significantly higher than what global price trends might suggest.
On August 1, 2025, the federal government officially announced the updated fuel prices for the first half of the month. According to the notification, the price of petrol has been reduced by Rs7.54 per litre, bringing it down to Rs264.61 per litre. In contrast, diesel prices have increased by Rs1.48 per litre, now set at Rs285.83 per litre.
This latest adjustment reflects a mixed outcome for consumers: while the decrease in petrol prices offers marginal relief, the increased levies and minor diesel hike suggest that the broader cost environment for fuel remains burdensome.
Observers note that these policy choices are part of the government’s ongoing strategy to balance public relief with fiscal obligations, particularly in the face of commitments made to international lenders and budgetary constraints. By raising levies while marginally reducing pump prices, the government appears to be managing short-term optics without delivering substantial long-term benefits to the average citizen.
As the cost of living continues to rise, the pressure on household budgets grows. Many citizens are questioning whether the current pricing model truly serves public interest or is primarily driven by the need to generate revenue.
The new fuel prices and levy structure are set to remain in effect for the first two weeks of August, after which the government is expected to reassess based on international oil trends and domestic fiscal needs.
