The federal government on Tuesday announced a sweeping set of environmental and fiscal reforms in the Budget 2025-26, including a Rs2.5 per litre carbon levy on petroleum products and furnace oil—a move that will make petrol and diesel more expensive for consumers.
The levy is part of the government's broader strategy to discourage fossil fuel consumption and promote electric vehicles (EVs). According to the budget, the carbon levy will double to Rs5 per litre in the fiscal year 2026-27, marking a steady shift towards greener alternatives.
To further bolster the EV transition, a separate levy on petrol and diesel vehicles has been proposed. The sale and import of fuel-powered vehicles will now be taxed based on engine capacity, effectively making larger, gas-guzzling cars more expensive while incentivising cleaner technologies. Electric motorcycles and rickshaws are set to be actively encouraged under the newly introduced Energy Vehicle Policy.