Unmindful of opposition within the ruling coalition, the petroleum ministry is pushing for freeing of petrol and diesel prices from government control along with a marginal hike in domestic liquefied petroleum gas and kerosene rates.
Finance minister Pranab Mukherjee is also believed to be in favour of decontrolling auto fuel prices to limit the government's subsidy outgo but a decision is unlikely in the next 7-10 days as United Progressive Alliance managers build political consensus on the issue, an oil ministry official said.
The Union Budget for 2010-11, to be presented by Mukherjee in Parliament on February 26, may provide pointers towards deregulation of prices as petrol and diesel rates would be revised every month based on average international price of the last 30 days.
The official said Mukherjee and petroleum minister Murli Deora feel that the current low international crude oil prices, possibly provide the last window to usher in reforms in the sector without consumers feeling the pinch.
Deregulation, at current rates would result in petrol prices going up by less than Rs 4 a litre and diesel by a shade lower than Rs 2 per litre.
Besides, the ministry wants LPG rates to be raised by Rs 20-25 per 14.2 kg cylinder and kerosene by at least Re one per litre, he said.
These measures would help cut Rs 45,571-crore (Rs 455.71 billion) revenue loss that state-owned fuel retailers would incur on selling petrol, diesel, domestic LPG and kerosene below cost during the current fiscal.
Of this, the government would bear Rs 31,574-crore (Rs 315.74-billion) loss arising on LPG and kerosene and give the three firms -- Indian Oil, Bharat Petroleum and Hindustan Petroleum -- the promised Rs 12,000 crore (Rs 120 billion).
Last week, Deora did not take the proposal to free auto fuel prices, along with hikes in cooking gas and kerosene rates, to the Cabinet due to opposition from the Trinamool Congress and the DMK.
The proposal was formulated after tweaking the report of the prime minister-appointed expert group on fuel pricing reforms, headed by Kirit Parikh that called for freeing petrol and diesel prices along with a steep Rs 100 per cylinder hike in LPG rates and Rs 6 a litre raise in kerosene prices.
Indian Oil Corporation, BPCL and HPCL currently sell kerosene at a loss of Rs 18.06 per litre and domestic LPG at Rs 287.59 per cylinder.
Petrol and diesel prices were freed by the Bharatiya Janata Party-led National Democratic Alliance government in April 2002 and revised on 1st and 16th of every month based on fortnightly average of international rates.
But this was reversed when the Congress-led government assumed charge in 2004.
