NA Committee Clears Carbon Levy, Raises Concerns Over EV Tax Plan and Energy Reforms

The National Assembly’s Standing Committee on Finance on Thursday was informed by the Petroleum Division that a carbon levy of Rs2.50 per litre will be imposed on petroleum products starting July 1, 2025.

Read More: Power Division Under Pressure to Retain Politically Backed CEO of Failing Power Utility

Currently, the petroleum levy stands at Rs77/litre on high-speed diesel (HSD) and Rs78.02/litre on petrol, with the government aiming to cap it at Rs90/litre. Despite being phased out from public power plants, furnace oil remains in use by Independent Power Producers (IPPs) and is expected to face a levy of Rs77/litre, officials noted.

The government also plans to borrow Rs1.275 trillion from commercial banks — at an interest rate 0.9% below the three-month KIBOR — to retire existing power sector debts. Of this, Rs683 billion will go toward Power Holding Company liabilities, to be repaid over six years at a rate of Rs323 billion annually.

The power division clarified that the Rs3.23/unit surcharge will not apply to lifeline electricity consumers, who continue to receive subsidized rates.

The committee approved in principle amendments to the Petroleum Products (Petroleum Levy) Ordinance, 1961, but requested clarification on whether the carbon charge should be treated as a levy or a tax.

Chairman Naveed Qamar clarified that the proposal for taxing solar energy originated from the National Assembly panel, not the Senate, as suggested by another member. He reiterated the panel’s earlier recommendation to avoid taxing solar in order to support renewable energy adoption.

EV Taxation Sparks Debate: The committee also reviewed the proposed New Energy Vehicle Adoption Levy Act, 2025, aiming to increase local EV production from 76,000 to 2.2 million units in five years, primarily electric motorcycles.

However, members raised objections after it was revealed that new levies will be imposed on car buyers to finance EV subsidies:

1% on cars up to 1300cc

2% on 1301cc–1800cc

3% on cars above 1800cc

These levies were not included in the Finance Bill 2025–26, drawing criticism. Committee members also noted the absence of a comprehensive EV transition plan, particularly the lack of charging infrastructure and the exclusion of hybrid vehicles. The proposal was deferred until the Ministry submits a detailed implementation roadmap.

Additional Legislative Matters: The committee also reviewed amendments to the Sales Tax Act, 1990, approving most clauses while deferring those related to fraud provisions for further scrutiny.

Regarding the Export Finance Scheme (EFS), the committee recommended aligning the taxation of locally produced raw cotton with that of imported cotton, and directed the Commerce Secretary and FBR Chairman to take necessary action.

Amendments to the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 were recommended for approval after thorough discussion.

However, proposed changes to the Stamp Act were deferred due to the inconsistent use of the term “non-filer”, which no longer exists in tax law.