"We will do all that is possible to protect the interests of our PSUs," Petroleum Minister Murli Deora said after a brief meeting with Prime Minister Manmohan Singh on the issue on Friday.
Deora said the issue could not be discussed at length due to paucity of time and a separate meeting may have to be convened next week to discuss the matter.
"A decision may take two-three days," he said, but did not rule out the possibility of a price hike. "I cannot say that (prices will not be increased)."
Deora is also believed to have briefed UPA chairperson Sonia Gandhi on the scenario emerging from international crude oil prices touching $96 a barrel.
When the Cabinet had on October 11 decided on sharing the burden of Rs 54,935 crore (Rs 549.35 billion) arising from not raising petrol, diesel, LPG and kerosene prices between the government and PSUs, the Indian basket of crude was averaging $68-69 a barrel.
However, the Indian basket is now trading at over $85 per barrel, widening the revenue loss of Indian Oil, Bharat Petroleum and Hindustan Petroleum by nearly Rs 7,000 crore (Rs 70 billion).
The state-run firms are currently incurring Rs 240 crore (Rs 2.4 billion) loss per day on sale of petrol, diesel, LPG (cooking gas) and PDS kerosene.
Deora said the situation on the ground had undergone drastic change from October 11 when the government had decided not to raise fuel prices during the remaining period of this year.
"Crude oil prices have gone up so much... they have put enormous burden on our PSUs. It is our duty to protect their interest and we will do all possible," he said.
The options before the government include raising the quantum of oil bonds to be issued to oil companies, lowering excise duty on petrol and diesel and cutting customs duty on crude oil, said Deora, who had yesterday discussed measures to cope with the record oil prices with Finance Minister P Chidambaram.
Officials said petroleum ministry is pressing for an excise duty cut of Rs 2 per litre on petrol and Re 1 a litre on diesel to offset the rise in revenue loss of Rs 61,840 crore (Rs 618.40 billion) on sale of petrol, diesel, domestic LPG and kerosene.
The government had last month decided to compensate 42.7 per cent of the then projected revenue loss of Rs 54,935 crore (Rs 549.35 billion) on fuel sale through issue of oil bonds.
Besides giving oil bonds worth Rs 23,457.24 crore (Rs 234.57 billion), 35 per cent or Rs 19,227.25 crore (Rs 192.27 billion) of the total under-realisation in revenue was to be borne by ONGC, GAIL and OIL. The remaining under-recovery was to be borne by IOC, BPCL and HPCL.
But with global crude prices crossing $96 a barrel, the compensation is now being considered inadequate. "Oil prices have gone up so much... we need to urgently find a solution," Deora said.
A Re 1 a litre cut in excise duty on petrol would help companies reduce losses by Rs 552.5 crore (Rs 5.52 billion) during the remainder period of this fiscal, while the same on diesel would help check losses by Rs 2,113.4 crore (Rs 21.13 billion).
The oil ministry has argued that increased realisation from customs duty on crude oil because of higher value of imported goods, can be used to reduce excise duty on petrol and diesel.
Fuel retailers IOC, BPCL and HPCL make a loss of Rs 4.94 on sale of every litre of petrol, Rs 6.50 per litre on diesel, Rs 16.42 a litre on kerosene and Rs 207 per cylinder on LPG.
While the compensation package may be pro-rated on the increased revenue loss - 42.7 per cent of Rs 61,840 crore (Rs 618.40 billion) through oil bonds and 35 per cent from upstream firms, retailers may be given some relief through a cut in excise duty on petrol and diesel.
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