Petrol prices may go up by Rs 3 a litre if Prime Minister Manmohan Singh at a meeting on Wednesday accepts the Petroleum Ministry's proposal to free pricing of petrol while gradually increasing the diesel rates.
The Prime Minister is scheduled to review the financial health of oil PSUs at a meeting with Finance Minister Pranab Mukherjee and Petroleum Minister Murli Deora on Wednesday evening.
"Petroleum Ministry is likely to propose deregulation of petrol prices and gradual phasing out of subsidies on diesel to ease burden on public sector oil marketing companies," a source said.
The government has not allowed Indian Oil, Bharat Petroleum and Hindustan Petroleum to raise rates of petrol, diesel, domestic LPG and kerosene despite the cost of raw material (crude oil) jumping to $82 per barrel.
The three firms are projected to lose Rs 44,300 crore in revenues on fuel sale this fiscal.
The three firms sell petrol at a loss of Rs 3.06 a litre, diesel at Rs 1.56 per litre, kerosene at a loss of Rs 17.23 per litre and LPG at a discount of Rs 299.01 a cylinder.
The source said the ministry may propose auto fuel deregulation in the light of finance ministry's failure to keep its promise of compensating the three firms for their losses on LPG and kerosene through issue of bonds.