The Planning Commission has pitched for linking of domestic fuel prices with those in the international market saying it is necessary for country's global "economic reputation".
"India's international economic reputation requires us to say that fuel prices are going to be linked to global prices. I think that linkage (of fuel prices with global prices) is unavoidable," Planning Commission's Deputy Chairman Montek Singh Ahluwalia told PTI.
Asked about the affect of deregulation of fuel prices on poorest of the poor, he replied, "If you want to give (subsidised) kerosene to BPL household, give them."
"I personally think we should explore that possibility (of giving direct subsidy) as elsewhere in the world that is regarded as very positive thing to move to the direct (fuel) subsidy," he said, when asked about leakages and diversion of subsidy on fuel.
The government has already formed an Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee on fuel prices deregulation. The EGoM is expected to meet on June 7.
Besides freeing petrol and diesel prices from government control, dealing with the revenue lost on selling domestic LPG and PDS kerosene below cost is also on agenda of the EGoM.
For petrol and diesel prices to be freed from government control, rates would have to be raised by over Rs 6 a litre.
Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum lose 255 crore a day by selling fuel below cost. They may end the fiscal with a Rs 90,000-crore revenue loss.
They currently sell petrol at a loss of Rs 6.07 a litre, while the loss is Rs 6.38 per litre of diesel, Rs 19.74 per litre of PDS kerosene and Rs 254.37 per 14.2-kg LPG cylinder.