This contradiction has once again come into focus as Jamaat-e-Islami demands the immediate abolition of the petroleum levy and a reduction in petrol prices. The government, however, appears reluctant to give up a major source of revenue at a time when it is struggling to meet its fiscal targets.
At the centre of the debate is a simple question: why should ordinary citizens continue to bear the burden of high fuel prices when the government has the power to reduce the taxes imposed on them?
Jamaat-e-Islami Emir Hafiz Naeem ur Rehman has demanded the immediate abolition of the petroleum levy, arguing that the government should pass on the benefit of lower international oil prices to consumers.
He has also called for petrol prices to be reduced to Rs225 per litre. The party maintains that the petroleum levy places an unfair burden on the public, particularly when people are already struggling with inflation, expensive transport and rising household expenses.
Negotiations between Jamaat-e-Islami and the government have been underway since September 3, 2026. The discussions have reportedly moved towards their final stages, with both sides attempting to reach an agreement.
However, the government has reportedly offered a reduction of Rs20 to Rs30 per litre, a proposal Jamaat-e-Islami has rejected as insufficient.
Planning Minister Ahsan Iqbal has ruled out an immediate reduction under political pressure, although he has indicated that a phased reduction could be considered in the next budget.
The government's reluctance is largely linked to its revenue requirements and commitments to the IMF.
Petroleum levy is an important source of federal revenue. In May, the levy on petrol reportedly stood at Rs117.4 per litre, while diesel carried a levy of Rs43 per litre. An October report put the combined taxes and duties on petrol at around Rs114 per litre.
For the fiscal year 2026–27, the government has set a petroleum levy collection target of Rs1,727 billion — Rs259 billion, or 17.6 per cent, higher than the previous target.
This means that abolishing or significantly reducing the levy would create a substantial gap in government revenue. The government would then have to find alternative sources of income, reduce expenditure or reconsider its fiscal commitments.
Hafiz Naeem ur Rehman has claimed that the government collects around Rs150 billion every month through petroleum-related taxes and levies. The annual collection target of Rs1,727 billion works out to approximately Rs144 billion per month.
For the government, the levy is a source of revenue. For consumers, it is an additional cost attached to every litre of fuel they purchase. That is where the interests of the state and the public collide.
The scale of the burden becomes clearer when the components of the petrol price are examined.
If petrol is priced at Rs352.59 per litre and around Rs114 is attributed to taxes and duties, removing these charges would bring the price down to approximately Rs239 per litre.
However, Jamaat-e-Islami's proposed price of Rs225 would require further reductions or adjustments beyond the removal of those taxes and duties. These could involve reviewing refinery and oil marketing company margins, as well as other components of the pricing structure.
The final retail price of petrol is not determined by taxes alone. International crude oil prices, the exchange rate, import costs, refinery margins and other charges also influence what consumers pay at the pump.
This is why a transparent breakdown of petrol prices is essential. Citizens should be able to see how much they are paying for the imported fuel itself, how much goes towards taxes and levies, and how much is added through other costs.
International oil prices have also played a major role in Pakistan's fuel-price debate.
Brent crude reportedly climbed to around $118 per barrel on November 1, after trading above $102 in early October. In August, prices had been close to $79 amid hopes that the Strait of Hormuz would reopen.
Pakistan's domestic petrol prices have experienced significant fluctuations. Petrol reached Rs458.41 per litre on April 3, while diesel climbed to Rs520.35. Earlier in the year, petrol had been priced at around Rs263 per litre. By November 11, the reported price had fallen to Rs338, while diesel stood at Rs371.
But lower fuel prices do not automatically translate into relief for households if taxes and other costs remain high.
The public is therefore entitled to ask whether reductions in international oil prices are being passed on fully and transparently, or whether a significant portion is being absorbed through government revenue and other pricing components.
Jamaat-e-Islami argues that the government should not treat the petroleum levy as an unavoidable burden on consumers. It says the state should reduce unnecessary expenditure, improve tax collection and explore alternative sources of revenue rather than relying heavily on fuel taxes.
The government's position is different. It argues that petroleum levy collections are necessary to meet budgetary targets and that removing the levy would create a revenue shortfall.
Both arguments point towards a wider economic problem: Pakistan's dependence on indirect taxation and its limited ability to generate sufficient revenue through a broader and fairer tax system.
The impact of expensive fuel also extends far beyond vehicle owners. Transport costs affect the prices of food, vegetables, agricultural inputs and almost every essential commodity. When petrol and diesel become expensive, the cost is eventually passed on to consumers, including those who do not own a vehicle.
That is why fuel-price relief cannot be viewed simply as a concession to motorists. It is closely connected to the cost of living across the country.
The ongoing negotiations between the government and Jamaat-e-Islami are about more than a reduction of a few rupees per litre. They reflect a larger disagreement over who should carry the burden of the country's economic difficulties.
The government needs revenue to meet its obligations, but citizens also need relief from rising living costs. Neither concern can simply be ignored.
A reduction in the petroleum levy may offer immediate relief, but it will not solve Pakistan's deeper fiscal problems. The country needs broader tax reforms, better tax collection, control over unnecessary government expenditure and a transparent fuel-pricing mechanism.
Ultimately, people are not merely asking for cheaper petrol. They want affordable public transport, lower food prices and enough income left at the end of the month to meet their basic needs.
That is the real petrol paradox: the state needs more revenue to run the country, while the people need lower costs to afford their lives. Unless the government addresses both sides of this equation, the debate over petrol prices will continue — and the public will keep paying the price.
