The prices of auto and cooking fuels are likely to shoot up steeply in the first week of March once the assembly elections are over.
Sources in the state-owned oil companies said the hike could be Rs 4 per litre for petrol, Rs 3 for diesel and Rs 50 per cylinder for cooking gas.
Oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — are currently losing Rs 4 a litre on petrol, Rs 14 on diesel and Rs 390 on every cylinder of liquefied petroleum gas (LPG).
Global crude oil prices touched $120.7 per barrel on Monday — the highest since June last year because of geopolitical tensions over key producer Iran, which meets 12% of India's needs.
An informal government diktat to the oil companies to hold the prices till the elections in five states had so far prevented a hike despite global oil rates climbing for the past two months.
Senior Indian Oil officials said the company was going through the "most difficult phase" and anticipated heavy losses.
"There is no alternative but to increase the prices," a senior official said.