New Delhi: With Assembly polls in four crucial states in mind, the government has decided not to increase prices of LPG and kerosene for a year and to phase out subsidy on the two important fuels in five years instead of three years as planned earlier.

The Cabinet turned down the pleas of state-run oil firms that prices of LPG and kerosene be increased in line with rising crude prices and falling government subsidy, official sources said.

Petroleum Minister Ram Naik informed the Cabinet that oil companies together lost over Rs 1,000 crore in the first quarter of this fiscal year due to unrealised cost of subsidised LPG and kerosene. They lost around Rs 5,400 crore last year.

After providing for government subsidy, oil companies are selling LPG at Rs 91 per cylinder below the cost and kerosene at about Rs 1.5 per litre.

Sources said the Cabinet decided that the loss on account of non-revision in prices would be shared between the oil marketing firms - Indian Oil, Bharat Petroleum and Hindustan Petroleum, and exploration company Oil and Natural Gas Corp.

It was also decided to phase out subsidy on the two fuels by March 2007.

During 2002-03, subsidy on LPG was Rs 3,691 crore while that on kerosene for public distribution system (PDS) Rs 3,018 crore.

PTI