Petroleum Import Tax Revenue Falls 1.73 Percent to Rs 113.58 Billion

KATHMANDU: The government collected Rs 113.58 billion in revenue from petroleum product imports in the fiscal year (FY) 2025/26, marking a 1.73 percent decline from the Rs 115.59 billion collected in the previous fiscal year, despite a significant rise in the country's petroleum import bill.

According to data from the Department of Customs, government revenue from petroleum imports fell by Rs 2.01 billion compared to FY 2024/25. The decline came even as Nepal's spending on petroleum imports surged, indicating that tax concessions introduced by the government reduced overall revenue collection.

The government levies multiple taxes on petroleum imports, including customs duty, pollution duty, green tax, infrastructure development tax, road maintenance fee, and value-added tax (VAT).

For every litre of petrol imported, the applicable taxes include Rs 25.23 in customs duty, Rs 1.50 in pollution duty, Re 1 in green tax, Rs 10 in infrastructure development tax, Rs 4 in road maintenance fee, and 13 percent VAT.

However, in response to rising international oil prices triggered by conflicts in the Middle East, the government has been providing a 50 percent concession on customs duty and infrastructure development tax on petroleum imports. According to officials at the Nepal Oil Corporation (NOC), this policy significantly reduced the government's tax earnings from petroleum products during the last fiscal year.

Excluding VAT, the total tax burden on one litre of petrol normally amounts to Rs 41.73. After the government's tax concession, the effective tax burden falls to Rs 24.11 per litre.

Among petroleum products, diesel remained the largest contributor to government revenue, generating Rs 57.70 billion in FY 2025/26, although this was slightly lower than the Rs 58.38 billion collected a year earlier. Revenue from petrol imports also declined to Rs 40.48 billion from Rs 42.25 billion in the previous fiscal year.

In contrast, revenue from aviation turbine fuel (ATF) increased substantially, rising to Rs 3.97 billion from Rs 2.94 billion, reflecting higher import volumes and increased aviation activity.

Overall, Nepal spent Rs 332.27 billion on importing petroleum products—including diesel, petrol, liquefied petroleum (LP) gas and aviation fuel—in FY 2025/26. Diesel alone accounted for Rs 172.43 billion, reaffirming its position as the country's most imported petroleum product.

The decline in petroleum-related tax revenue, despite higher import expenditure, underscores the fiscal impact of the government's decision to cushion consumers from global fuel price volatility through tax relief measures.