Senate Finance Committee Rejects Carbon Levy, Seeks Revisions in Public Finance Act and Power Sector Policy

Islamabad – In its recent session, the Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla, voiced serious reservations over key financial provisions in the Finance Bill 2025–26, including a proposed Rs. 2.5 carbon levy, certain clauses of the Public Finance Management Act, and proposals related to the power sector’s circular debt strategy.

The Committee vehemently rejected the Rs. 2.5 per liter carbon levy, highlighting the absence of a comprehensive emission reduction plan by the Petroleum Division. Senator Mandviwalla criticized the levy, calling it environmentally and fiscally unjustified, stating, “You cannot impose a carbon levy in the name of climate without a viable and sustainable emissions roadmap.”

The Committee also called for rationalization of clauses in the Public Finance Management Act that allow autonomous bodies to retain funds and deposit surplus into the Public Account, warning that these provisions could lead to financial irregularities and reduce fiscal transparency. Senators urged a policy review to ensure stronger oversight and accountability.

The Committee was briefed on tax exemptions extended to businesses in Khyber Pakhtunkhwa and newly merged tribal districts. It was informed that cinema operators in these areas will receive five-year tax exemptions from the start of operations, valid until 2030. Furthermore, the Federal Board of Revenue (FBR) has extended the withholding tax exemption for businesses in former FATA regions until 2026.

In a notable development, FBR Chairman Rashid Mahmood Langrial introduced the Digital Presence Proceeds Act, a newly proposed framework to tax foreign digital platforms operating in Pakistan without a physical presence. He explained that this measure aims to ensure tax equity in the digital economy and increase domestic revenue from global tech companies.

The Committee also reviewed the power sector refinancing proposal for clearing circular debt. Officials from NEPRA informed the committee that Rs. 3.23 per unit is currently being recovered from consumers, and proposed the removal of the existing 10% cap on surcharges, which they argue is hindering the ability to secure refinancing arrangements essential for debt repayment.

Present at the session were Senators Syed Shibli Faraz, Mohsin Aziz, Faisal Vawda, Anusha Rahman Ahmad Khan, Muhammad Abdul Qadir, Ahmed Khan, and Shahzaib Durrani, along with Federal Finance Minister Muhammad Aurangzeb, Minister of State for Finance Bilal Azhar Kayani, FBR Chairman Rashid Mahmood Langrial, and other senior officials from finance and energy departments.