Prime Minister Shehbaz Sharif on Friday jacked up prices of both high-speed diesel (HSD) and petrol by Rs26.77 per litre despite no increase being required in the rates of petrol.

The premier imposed a nearly Rs27 per litre additional tax on the fuel to push its price higher.

Accordingly, the HSD price has been fixed at Rs380.19 per litre, up from Rs353.42 per litre. This marks a 7.5% increase. Diesel prices are still significantly lower than their peak of Rs520.4 on April 10. Diesel is considered the most inflationary fuel due to its widespread use in freight transportation and the agriculture sector.

The prime minister approved an increase in petrol prices to Rs393.35 per litre, up from Rs366.6. This shows an increase of 7.3% over the existing prices. Petroleum Division officials said that there was no change in the petrol prices in the international market and the rates had to be jacked up due to an increase in the tax.

Read: PM Shehbaz approves Rs32.12 per litre cut in high-speed diesel price

The finance ministry spokesman was not available for comments. However, Petroleum Minister Ali Pervaiz Malik said in a statement that oil prices were increasing once again in the global market due to regional tensions.

"Due to the pressure of rising oil prices and agreements with global partners, the government is having to take steps to transfer the burden of increasing oil prices.

"In view of these circumstances, the price of diesel is being increased by Rs 26.77 and the price of petrol by Rs 26.77 for the next week. As much as possible, the government tolerated the increase in the prices of petroleum products at the global level," the minister said, adding that all provincial governments, including the federal government, gave a "historic relief package" to the people.

"I pray that progress is made soon in achieving regional peace and relief can be provided to the people in the prices of petroleum products."

The new petroleum levy rate on petrol has been fixed at Rs107.4 per litre, as PM Shehbaz again chose to recover the tax meant to be recovered from diesel consumers from petrol consumers — a policy that he had earlier implemented and then reversed after public backlash.

Last month, the prime minister increased the petroleum levy rate on petrol to a record Rs160 per litre in the middle of skyrocketing prices. Later on, the premier took the credit for reducing the tax to Rs80.

Sources said that the International Monetary Fund (IMF) has asked the government to charge Rs80 per litre tax on diesel and petrol. Instead of introducing a petroleum levy on high-speed diesel, PM Shehbaz, in the first step, increased the tax on petrol to Rs107.4 per litre.

There is still a requirement by the IMF to further increase the tax by Rs53 per litre. Sources said that the government would take the decision next week whether the remaining Rs53 per litre tax should be recovered from diesel or petrol users.

The ministry sources said that the government had already collected little over Rs1.2 trillion in petroleum levy during the first nine months of the fiscal year, equal to 82% of the annual target of Rs1.468 trillion.

Yet, the government has chosen to further increase the burden on petrol consumers, mostly poor motorcycle owners, and car owners belonging to the low middle income to the highest income groups.

The government is trying to appease the users of diesels, but may end up irritating both diesel and petrol consumers, as prices are still on the rise for both categories.

Also Read: POL prices slashed amid global fuel ease

The government had earlier slashed the federal development budget by 17% or Rs173 billion to offset the impact of the reduction in petroleum levy on diesel and partially subsidise the commodity.

The government is currently collecting about Rs36 per litre tax on diesel, including Rs33 in customs duty and Rs2.5 as climate support levy. Total taxes on petrol amount to Rs134 per litre, including Rs107 petroleum levy, Rs24 customs duty and Rs2.5 climate support levy.

As per the understanding with the IMF, the climate support levy would be further increased by Rs2.5 per litre on both the products, reaching Rs5 per litre from July 1st.

Government functionaries have remained unable to convince the IMF to relax punitive conditions even during wartime. The demand to further increase the petroleum levy rates and the climate support levy shows the lack of convincing power of the negotiators.

The IMF is expected to approve the fourth loan tranche and the third review of the $7b bailout package in the first week of May.

Due to a reduction in global prices, superior kerosene oil and light diesel oil have been reduced. Kerosene oil prices have been reduced from Rs429 per litre to Rs365 per litre. There is a reduction of Rs63.6 per litre in kerosene oil price. The government is charging Rs20.4 per litre on the petroleum levy.

Light diesel oil prices have been reduced from Rs299 to Rs270 per litre — a reduction of Rs29 per litre. The price is inclusive of Rs15.8 per litre petroleum levy.