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A higher dose of diesel price increase and a rise in the price of subsidised cooking gas is likely after Tuesday, when petroleum minister Veerappa Moily is scheduled to return from an official visit abroad.
The ministry of petroleum and natural gas is looking for something more than the 50p a litre monthly rise since the decision on phased decontrol of diesel prices early this year.
"A decision on this should be taken at the higher level by the Congress (party) core committee and Cabinet Committee on Political Affairs next week," a senior ministry official told Business Standard.
There were reports that it was approaching the Cabinet for a higher dose, perhaps Rs 3 a litre.
On Thursday, petroleum secretary Vivek Rae told the media, "Some burden has to be borne by the consuming population. That is the challenge the government faces. It is a political challenge, it is an economic challenge. It is a challenge we cannot run away from."
Rae said the subsidy burden had reached unsustainable levels, which could not be only financed by the government budget and oil companies. Even after the monthly increase in August, the under- recovery on retailed diesel was Rs 12.12 a litre for the first fortnight of this month.
The deteriorating rupee had adversely impacted under-recovery on other sensitive products. At current levels, these are Rs 36.83/litre for kerosene and Rs 470 a cylinder for domestic LPG.
For 2013-14, the under-recovery on sensitive petroleum products is expected to cross Rs 161,000 crore at the current level. The oil subsidy has increased by Rs 20,000 crore in the past two months on a depreciating rupee that made import costlier.
