The federal government has imposed a new petroleum levy on high-speed diesel (HSD) while slightly reducing the levy on petrol. The decision was announced through a late-night notification issued by the Petroleum Division and came into effect on May 1, 2026.
This move is part of the government’s ongoing efforts to adjust fuel taxes and generate revenue amid economic challenges.
Fresh Levy Imposed on Diesel
Under the new policy, high-speed diesel, which previously had no petroleum levy, will now be taxed at Rs. 28.69 per litre.
This is a major change, as diesel had remained exempt from this levy. The new tax is expected to significantly increase the overall cost of diesel.
Petrol Levy Reduced Slightly
In contrast, the government has reduced the petroleum levy on petrol by Rs. 3.88 per litre. The levy has been brought down from Rs. 107.38 to Rs. 103.50 per litre.
While this reduction may provide some relief, it is expected to benefit mostly private vehicle owners.
Updated Petroleum Levy Rates
| Petroleum Product | Previous Levy | New Levy | Change | Climate Support Levy |
|---|---|---|---|---|
| High Speed Diesel (HSD) | Rs. 0.00 | Rs. 28.69 / litre | ▲ +Rs. 28.69 | Rs. 2.50 |
| Petrol (Motor Gasoline) | Rs. 107.38 | Rs. 103.50 / litre | ▼ −Rs. 3.88 | Rs. 2.50 |
| HOBC / MS 95–97 RON | — | Rs. 305.37 / litre | — | Rs. 2.50 |
| Superior Kerosene Oil | — | Rs. 20.36 / litre | — | — |
| Light Diesel Oil | — | Rs. 15.84 / litre | — | — |
| Furnace Oil | — | Rs. 77.00 / litre (eqv.) | — | — |
Government Relies on Fuel Levies for Revenue
The revised levy structure applies to several petroleum products. The government continues to rely heavily on petroleum levies as a key source of revenue due to ongoing fiscal pressures and tax collection challenges.
Officials say fuel levies are easier to collect because they are included directly in fuel prices, unlike traditional taxes that depend on public compliance.
Economic Impact: Diesel Price Increase May Raise Inflation
The increase in diesel levy is expected to have a wide impact on the economy. Diesel is widely used in transportation, agriculture, and industrial sectors.
Higher diesel costs usually lead to increased transport fares, higher food prices, and overall inflation, affecting a large portion of the population.
Limited Relief from Petrol Levy Cut
Although the petrol levy has been reduced, the relief is expected to be limited. Petrol is mainly used by private vehicle owners, so the broader economic impact of this reduction is likely to be small compared to the diesel tax increase.
Other Fuel Levies Remain Unchanged
The notification also confirms levy rates on other petroleum products, including premium gasoline, kerosene oil, light diesel oil, and furnace oil.
In addition, the Climate Support Levy will continue to be applied to selected fuel products as part of the government’s environmental and revenue policies.
