Domestic LPG prices may go up by Rs 22-25 per cylinder this week as oil companies push for a hike in retail selling price following the lowering of subsidy provision for cooking gas and PDS kerosene in Budget 2003-04.

"Though the Budget shows a 40 per cent increase in subsidy outgo on kerosene and domestic LPG, the Rs 6300 crore (Rs 63 billion) provision for 2003-04 includes undisbursed subsidy element of Rs 2198 crore (Rs 21.98 billion) for the current year," official sources said.

Finance ministry had provided Rs 4,495.80 crore (Rs 44.96 billion) subsidy this fiscal, they said adding subsidy on LPG has gone down from Rs 67.75 (for 2002-03) to Rs 46 per cylinder while that for kerosene has fallen to Rs 1.64 per litre for the next fiscal from Rs 2.45 per litre, necessitating a hike in price.

State oil firms have together lost about Rs 3200 crore (Rs 32 billion) during 2002-03 on selling LPG and kerosene below the cost. The Rs 67.75 per cylinder subsidy element provided this fiscal covers only half of the Rs 125 per cylinder gap between the artificially suppressed domestic retail price of Rs 241.20 in Delhi and actual average cost.

The subsidy cut implies raising kerosene prices by close to a rupee but given the nature of the politically sensitive commodity, its prices may not be increased.

"Oil companies are pushing for passing on at least the reduced subsidy on LPG to consumers and a decision was likely this week," they said adding Petroleum Minister Ram Naik will have the final say on the matter.

The total subsidy on LPG and kerosene for 2002-03 is close to Rs 10,000 crore (Rs 100 bollion), of which the government is reimbursing Rs 6700 crore (Rs 67 billion).

Even the last week's Rs 1.50 per litre increase in petrol and diesel prices was short of at least Rs 3 per litre hike needed in step with the surge in international oil prices, which are ruling at a 12-year high, sources said.

Even though the oil sector was deregulated from April 1, 2002 and state-owned companies are free to fix retail selling prices, the petroleum ministry continues to pull the strings.

"While Naik asked oil firms to defer their scheduled price revision on February 15 in view of polls in four states, he regulated the extent of price increase announced on February 28," they said.

State oil marketing companies had lost Rs 2000 crore (Rs 20 billion) during April-May 2002 for selling petro products below the cost of crude and even though Naik had assured that they would be compensated through issue of government bonds, the Budget did not see any announcement to that effect.

In case of LPG and kerosene, the finance ministry had last year announced a flat subsidy scheme in Budget 2002-03, based on which oil companies should have been changing prices at the retail end, with respect to global prices.

LPG prices have moved up from $185 dollar per tonne in April last to $356 dollar per tonne now. Oil companies, however, continue to sell at the same price.