Sunday, March 20 2005 16:18 Hrs (IST) - World Time -

New Delhi: The Union Cabinet is likely to consider next week raising petrol prices by Rs 2.80 per litre and diesel by about Rs 2 per litre, a hike that has been necessitated due to sharp rise in international oil prices.

Petrol prices have to be raised by about Rs 5 per litre and diesel by about Rs 4.30 per litre due to the Indian basket of crude touching a historic high of over $ 51 a barrel.

"This hike is being proposed to be effected in two stages. The first on April one and the second on May one," a top Government official said.

IOC, Bharat Petroleum Corp and Hindustan Petroleum Corp have sought a Rs 3.50 per litre and Rs 2.80 a litre hike in petrol and diesel prices respectively, the official said.

Besides, they also want a Rs 1.50 per litre increase in the two fuel prices commensurate with the investments they had made for producing ultra low sulphur Euro III grade petrol and diesel for 11 major cities and Euro II auto fuel for the rest of the country from April 1.

The oil companies are investing over Rs 40,000 crore in upgrading fuel quality.

IOC, which controls half of the oil market, will loose Rs 250 crore on selling petrol and diesel below the cost in the second fortnight of March. For the full month, the loss is pegged at Rs 400 crore, the official said.

The official said the raise sought by the oil companies was besides the Rs 2.85 a litre increase in petrol and Re 1 per litre hike in diesel prices necessitated by the Budget 2005-06 proposal to raise excise duty on the two fuel.

Not passing on the increased incidence of excise duty would result in around Rs 264 crore (about Rs 106 crore on petrol and Rs 158 crore on diesel) loss to them every fortnight.