Till now the government had kept the burden of higher fuel prices from hitting the common man by asking public sector oil units to subsidise oil prices.
Oil and Natural Gas Corporation in 2004-05 paid retailing firms Indian Oil Corp, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation about Rs 4,100 crore to partly cover for the losses on LPG and kerosene sale.
Gas Authority of India Ltd shelved out Rs 1138 crore (Rs 11.38 billion) but will not be asked to bear subsidy on petrol and diesel.
"Upstream firms have made huge killing because of rising crude prices and so they are being asked to bear some of the burden on retail front. The one-third subsidy sharing scheme for LPG and kerosene, where upstream firms ONGC, OIL and GAIL bear one-third of losses on cooking fuel, would continue this fiscal," a source said.
Petrol price needs to be raised by Rs 2.87 a litre and diesel by Rs 3.73 per litre in line with the hike in excise duty and road cess and raw material (crude oil) becoming dearer.
Sources said there was near unanimity when petroleum ministry officials met, that the increased incidence of excise duty on petrol and diesel, the hike in road cess and the marginal cost of supplying cleaner fuel be passed on to consumers while oil companies will bear the rise in cost due to spike in international prices.
The hike in excise duty and road cess warrant a Rs 2.20 per litre increase in petrol and Rs 1.06 a litre raise in diesel prices. Additionally, the cost of supplying cleaner fuel from April 1 came to Rs 0.30 per litre for petrol and Rs 0.24 a litre for diesel.
The oil companies will have to take on themselves the Rs 0.37 per litre increase necessitated in petrol prices due to the surge in international oil prices and Rs 2.43 a litre on diesel.
Separately, the ministry has sought Rs 20 per cylinder hike in LPG and Rs 3 per litre increase in kerosene prices to cut the Rs 81.93 per cylinder loss on LPG and Rs 10.31 a litre loss on kerosene sale.
Petrol and diesel prices have remained unchanged since November 2004 despite a $10 a barrel increase in crude oil prices.
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