The Committee, which submitted its report to Prime Minister Manmohan Singh earlier this month, is believed to have suggested raising petrol and diesel prices by a small amount every month till they are at par with production cost, sources who had seen the report said.

Besides freeing pricing of petrol and diesel from administrative control, it also favoured subsidising cooking fuels LPG and kerosene through a new tax on oil produced from fields awarded prior to the advent of New Exploration Licensing Policy (NELP) in 1999.

At present, only state-run producers like ONGC [Get Quote] shell out a part of their revenues from high oil prices towards fuel subsidies. If the recommendations are accepted, it would mean oil producers like Cairn (in Ravva field) and BG-Reliance (in Panna/Mukta fields would also have to pay for subsidies.

Sources said the Chaturvedi Committee, that went into the financial health of oil PSUs, has also suggested pricing fuel at export-parity  rates that a company may get if the fuel was to be exported.

These rates would be 10-15 per cent lower than the trade parity pricing followed now, thereby bringing down the projected revenue losses. Domestic retail price is currently determined in a 80:20 mix of import-parity and export-parity prices.

Besides, the panel has also recommended squeezing the marketing margins but has not favoured any tax on windfall gains some refiners particularly in the private sector have made in recent times.