The government on Tuesday cut the subsidy on domestic gas LPG and kerosene to Rs 22.58 per LPG cylinder and 81 paise per litre on kerosene for 2004-05.

During 2003-04, the government was offering a subsidy of Rs 45.17 per LPG cylinder and Rs 1.63 per litre on kerosene.

The subsidy would be eliminated altogether from 2005-06, petroleum ministry officials said in New Delhi.

They said the government had in 2002-03 charted a three-year subsidy phase out programme by providing fixed subsidy on LPG and kerosene.

In the first year, that is 2002-03, the government provided state-run oil firms a subsidy of Rs 67.75 per LPG cylinder and Rs 2.45 per litre on kerosene.

As against a Budget estimate of Rs 6,300 crore (Rs 63 billion) for LPG and kerosene subsidy, and a revised estimate of Rs 6,292 crore (Rs 62.92 billion) in 2003-04, the Budget estimates for 2004-05 has been fixed at Rs 3,500 crore (Rs 35 billion).

Subsidy is provided to oil companies for transporting essential fuels to far-flung and hilly areas.

The Budget estimates for 2004-05 with regard to investment in public enterprises in petroleum sector is pegged at Rs 23,575 crore (Rs 235.75 billion) and for the petro-chemicals sector it is fixed at Rs 1406.20 crore (Rs 14.06 billion).