The government on Tuesday informed Parliament it was willing to decontrol diesel prices - an indication that steeper rates for the fuel could be on way.
MoS finance NN Meena told Rajya Sabha in a written reply that the decision to free the retail price of diesel from state control had been taken in principle.
The BJP opposed the move immediately.
"Diesel is a basic fuel for all types of transport, so there will be a cascading effect on price rise," said party spokesperson Prakash Javadekar.
Chief economic advisor Kaushik Basu had two days ago indicated that India would see important reforms in the next six months, including a possible partial decontrol of diesel prices.
"The prices of petrol and diesel will have to go up. It's only a matter of time," a senior Congress minister told HT.
A hike in fuel rates has been expected for long - by Rs. 4-5 per litre for petrol and Rs. 3-4 for diesel.
Higher diesel prices will help reduce the ballooning fiscal deficit but stoke inflationary pressures.
But there are indications the government could go ahead and announce measures to control its close to Rs. 15 a litre subsidy on diesel.