State-run oil firms have stopped issuing new domestic cooking gas connections in view of the surge in steel prices, which increases the manufacturing cost of cylinders.

"The steel cost has gone up by from Rs 17,000 per tonne to Rs 28,000 per tonne whereas the security deposit per connection has been static at Rs 650 per cylinder. We cannot sustain operations like this," a senior official of Indian Oil Corp, country's largest retailer, said.

The official, however, clarified that the stop order was only temporary and all three retailers (IOC, Bharat Petroleum Corp and Hindustan Petroleum Corp) will start issuing new connections once the government agrees to raise security deposit to Rs 900 per cylinder.

Domestic LPG customers currently pay a one-time security of Rs 650 per cylinder at the time of taking the connection.

This, IOC says, is not commensurate with the cost and should be hiked.

The official said oil retailers were already losing over Rs 68 per cylinder on LPG price freeze. "The current price of Rs 261 per cylinder is way short of cost."

The latest move by the oil firms is being seen by the industry as "arm-twisting" measure to prompt the government to increase LPG security deposit.