The proposal has to be passed by the Empowered Group of Ministers (EGoM). Thisprice hike, as a means to cut the fuel subsidies significantly, would be the third increase in the price of fuels in nearly a year.
The petroleum ministry had increased petrol prices by Rs 4 a litre and diesel by Rs 2 per litre, on July 2 2009. Finance Minister Pranab Mukherjee had raised the petroleum products taxes unexpectedly in Feb, 2010 budget which again increased the petrol price by Rs 2.71 and diesel by Rs 2.55, per litre.
Government is expected to be contended with the latest move as the impact on the consumer would not be as extreme as two weeks before, when fuel prices increased almost Rs 7 per litre, due to the softening global crude oil prices.
The source from UPA government said that the price hike cannot be more than the revenue loss. The state-run oil marketing companies including Bharat Petroleum Corp, Indian Oil Corp and Hindustan Petroleum Corp sell auto and cooking fuels at government set prices to help control inflation. Such companies are currently losing Rs 2.79 a litre over the petrol sale and Rs 2.91 on diesel.