The Union Cabinet is likely to discuss on Thursday a Petroleum Ministry proposal for freeing petrol prices from government control and a moderate increase in diesel, cooking gas and kerosene rates.
Oil Minister Murli Deora held consultations with key allies DMK and Trinamool Congress on the subject on the issue on Wednesday.
Deora met A Raja, Telecom Minister and senior leader of UPA's key ally, DMK, this morning and spoke over the phone to Trinamool Congress leader and Railway Minister Mamata Banerjee explaining the "precarious" situation that PSU oil firms would find themselves in, if fuel prices were not hiked.
Sources said that both Raja as well as Banerjee were non-committal on the stand that their parties may take if the proposal of freeing petrol prices - that would lead to a price increase of Rs 4.72 a litre - comes before Cabinet on Thursday.
Already, opposition from key allies has seen Deora drop the proposal to free diesel prices that would have resulted in rates going up by Rs 2.33 a litre. However, there is now a move to hike diesel rates by at least one rupee a litre.
Deora may, however, bargain for an increase in LPG and kerosene rates although it would not be in the range of the steep Rs 100 per cylinder and Rs 6 a litre hike, respectively, suggested by the Kirit Parikh panel on fuel pricing reforms.
Sources said he may bargain for half of the increases suggested by the panel, but may settle at Rs 25 per cylinder hike in LPG rates and Re one a litre raise in kerosene prices.
The Congress party core group, which includes UPA Chairperson Sonia Gandhi, will meet to examine the proposal before it goes to the Cabinet.