Fuel consumers in Pakistan are set to bear an additional Rs34 billion burden over the next year following a government decision to increase the Inland Freight Equalisation Margin (IFEM) on high-speed diesel by over Rs1.50 per litre. The move comes under pressure from oil refineries and oil marketing companies (OMCs), and adds to the already high cost of fuel.
According to the Oil and Gas Regulatory Authority (Ogra), Pakistan consumes roughly 832 million litres of petrol and 670 million litres of diesel each month. Even minor adjustments in margins can have a massive financial impact on consumers.
For over two decades, local refineries have collected a 7.5% deemed duty on petroleum products — a levy originally intended to fund plant upgrades and produce cleaner, international-standard fuels, especially diesel with lower sulfur content. Yet, despite billions of rupees collected, none of Pakistan’s local refineries have been upgraded to produce Euro-V compliant fuel, the global benchmark for reducing vehicle emissions.
This failure has contributed significantly to worsening air quality in major cities like Lahore, Karachi, and Faisalabad. High-sulfur diesel and low-grade petrol are major contributors to toxic smog and pollution-related health issues, including respiratory illnesses and cancer.
Meanwhile, OMCs and fuel dealers are raking in substantial profits, with margins of Rs16.51 per litre on both petrol and diesel. The Economic Coordination Committee (ECC) approved the freight margin hike to help settle outstanding dues owed to refineries and OMCs, particularly after the government brought the general sales tax (GST) on petroleum products down to zero.
There is also a proposal to raise the freight margin on petrol, which would further drive up fuel prices and household costs. Currently, consumers are already paying Rs78.02 per litre in petroleum levy on petrol and Rs77.01 per litre on diesel, with the ECC now capping the levy at Rs90 per litre.
Despite collecting billions in deemed duty, refineries have delivered little, leaving consumers to pay the price — both in rupees and in public health. With the government again bowing to industry pressure, the financial and environmental cost continues to mount for ordinary citizens.
