The recommendations of the committee are not binding and need cabinet approval to be implemented. With state elections looming from November and a general election due by May 2014, the government may find it difficult to raise domestic fuel prices sharply.
India, the world's fourth-largest oil importer, needs to rein in subsidy spending to help stabilise its finances and support the rupee, which hit a record low earlier this year.
The diesel price hike could cut the government's fuel subsidy bill by as much as 160 billion rupees from November 1 to the end of the current fiscal year on March 31, 2014.
Diesel accounts for over 40% of refined fuel use in the country.