Prime Minister Manmohan Singh today constituted an Empowered Group of Minister to decide on freeing petrol and diesel prices from government control and a decision is likely after Parliament session ends on May 7.
The EGoM will be headed by Finance Minister Pranab Mukherjee and its decisions would not be required to be approved by the Cabinet, official sources said.
"We expect a decision (on fuel prices) to be taken in the next 10-12 days," a senior official said.
Freeing petrol and diesel prices from government control is being considered after revenue losses of state retailers in 2010-11 was projected to climb to over Rs 85,000 crore.
Mukherjee while replying to the debate on Finance Bill in Lok Sabha today said retailers IOC, BPCL and HPCL are projected to lose over Rs 85,000 crore in revenues on selling petrol, diesel, domestic LPG and kerosene below cost.
Sources said one of the options being considered is freeing auto fuel prices, while revenue loss on domestic LPG and kerosene could be made up by upstream firms like ONGC.
Decontrolling auto fuel prices would mean a hike of Rs 6.68 per litre in the rates for petrol sold in Delhi and a Rs 5.81 per litre increase in diesel rates.
Sources said the EGoM may decide if the hike necessary to take domestic retail prices to international parity should be implemented in one or more instalments.
The Petroleum Ministry is keen that petrol and diesel prices are freed and wants a moderate hike in the price of LPG, which is being sold at a loss of Rs 265.27 per 14.2-kg cylinder. On PDS kerosene, oil firms lose Rs 18.42 per litre.
Sources said the three retailers lost Rs 47,960 crore on selling fuel below cost in the 2009-10 fiscal.
The government has not yet said how it will make up for the projected losses this fiscal.
There was an agreed formula to share under-recoveries for 2009-10, but there is no word for the current year, they said.
In FY'10, the losses on petrol and diesel were to be met by upstream firms like ONGC and the government was supposed to shoulder the under-recovery on cooking fuel. However, the government has not kept its part of the deal.
Of the Rs 29,353 crore revenue loss in the April-December period, upstream firms contributed Rs 8,364 crore to cover for the entire shortfall on petrol and diesel. But against the Rs 20,989 crore loss on LPG and kerosene in the first nine months, the Finance Ministry has provided Rs 12,000 crore.
Besides the Rs 8,989 crore uncovered amount in the April-December period, about Rs 12,000 crore of revenue loss on LPG and kerosene in the January-March quarter remains uncovered.