Wednesday, February 15 2006 14:18 Hrs (IST) - World Time -

New Delhi: Petrol and diesel prices may go up by Rs 1-2 a litre by the month end but LPG and kerosene are likely to be spared, as Finance Ministry has agreed to give oil firms a second tranche of bonds to cover for the losses suffered by them on sale of the two subsidised cooking fuel.

The 2006-07 Budget, to be presented on February 28, may propose a Rs 0.79-1 a litre hike in petrol and Rs 1.72-2 per litre increase in diesel prices after affecting a customs duty cut on the two products as suggested by the C Rangarajan Committee on petroleum pricing, a top official said.

Without reducing the customs duty to 7.5 per cent from current 10 per cent, the hike required in petrol prices would have been Rs 1.70 a litre and Rs 2.60 a litre in diesel.

The Committee's suggestion to immediately raise domestic LPG price by Rs 75 per cylinder and thereafter by Rs 25 every quarter till subsidy is eliminated is unlikely to be adopted.

Its other suggestion to hike kerosene price by Rs 10 a litre, with a Rs 9 per litre subsidy component by way of discount coupons or vouchers to beneficiaries, could also meet the same fate as Petroleum Minister Murli Deora is against any hike in cooking fuel price.

The Committee, which is to submit the final report on February 17, has also suggested a reduction in excise duties on petrol and diesel but this too is unlikely to be adopted.

The official said Finance Ministry has agreed to give IOC, BPCL, HPCL and IBP a second tranche of 9-year oil bonds worth Rs 5,750 crore, carrying an average coupon rate of 7 per cent to compensate them for losses on LPG and Kerosene in the current fiscal.

For the next fiscal, cess on domestic crude oil would be increased by Rs 5,005 per tonne.