The government plans to hike diesel prices by up to Rs 3 a litre soon after the Assembly elections in five states are over next week, while an equivalent steep increase in petrol rates is also on card.

"An empowered group of ministers headed by Finance Minister Pranab Mukherjee is scheduled to meet on May 11 to mull on a hike in diesel prices," a top government official, refusing to be named, told reporters in New Delhi.

A Rs 3-4 a litre hike in the price of petrol, which had been freed from government control last June, is also on the cards immediately after polling in the last phase of Assembly elections is completed on May 10.

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"Petroleum Ministry officials on Tuesday discussed with the Election Commission the issue of raising prices before Assembly election results are announced on May 13. The Election Commission is believed to have cleared the move," he said.

Officially on the EGoM's agenda is ways of mitigating the over Rs 180,000-crore (Rs 1,800-billion) revenue loss state-owned oil firms have projected in 2011-12 on selling diesel, domestic liquefied petroleum gas and kerosene at current rates.

An increase in domestic LPG prices may also be discussed at the EGoM meeting that will decide on how the oil firms will be compensated for their losses, he said.

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State-owned Indian Oil, Bharat Petroleum and Hindustan Petroleum currently lose Rs 16.17 a litre on diesel and after adding local sales tax or VAT, the desired increase to make rates at par with international prices is Rs 18.19 a litre.

The companies have not even raised price of petrol, a commodity which was freed from government control in June last year, in view of Assembly elections in five states like West Bengal and Kerala.

The hike need to take petrol prices to international parity is about Rs 8.50 per litre, but the entire burden will not be passed on to consumers in one go.

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"Oil companies will be asked to stagger the hike over a couple of months," the official said.

Besides petrol and diesel, the three state oil firms lose Rs 29.69 a litre on kerosene and Rs 329.73 per 14.2 kg domestic LPG cylinder.

Indian Oil, Bharat Petroleum and Hindustan Petroleum will 'at current international crude oil prices lose Rs 180,208 crore (Rs 1,802.08 billion) in revenues on selling diesel, domestic LPG and kerosene below their imported cost in the 2011-12 fiscal", the official said.

The revenue loss, termed as under-recovery by oil firms, will be the highest ever, even more than what they lost in 2008-09 when crude touched a record high of $147 a barrel.

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In addition, they lose about Rs 8.50 per litre on petrol, whose rates have not moved in tandem with the imported cost despite its pricing being freed from government control in June last year.

"Losses on petrol are not included in the under-recovery figures for 2011-12 as it is a decontrolled commodity," the official said.

The basket of crude oil India buys had averaged $83.57 per barrel in 2008-09 and calculations for the current fiscal have been done at the prevailing rates of around $110 a barrel.

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"The average price of the Indian basket of crude oil last fiscal was $85.09 per barrel, higher than the 2008-09 average when the government had cut customs and excise duty on crude oil and products to check the impact of rising international rates on domestic markets," the official said.

Finance Minister Pranab Mukherjee has refused to cut customs and excise duty on crude this time to protect his projected fiscal deficit.

"The situation in the current fiscal will be worse, the three PSU oil marketing companies are losing Rs 540 crore (Rs 5.4 billion) per day on diesel, domestic LPG and kerosene sales," he said.

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In 2008-09, the government had issues oil bonds worth Rs 71,292 crore (Rs 712.92 billion) to the three firms to make up for more than two-thirds of the Rs 103,292-crore (Rs 1.032.92 billion) revenue loss.

Upstream oil firms like ONGC provided another Rs 32,000 crore (Rs 320 billion).

In the 2010-11 fiscal, the three firms lost Rs 78,202 crore (Rs 782.02 billion), but so far, the government has provided only Rs 20,911 crore (Rs 209.11 billion) in compensation.

The oil marketing firms lost Rs 2,227 crore (Rs 22.27 billion) on selling petrol below the imported cost during April and June before its price was freed from government control.

They lost Rs 34,384 crore (Rs 343.84 billion) on the sale of diesel, Rs 19,566 crore (Rs 195.66 billion) on PDS kerosene and Rs 22,025 crore (Rs 220.25 billion) on the sale of domestic LPG.