The oil ministry has moved two separate cabinet notes - one to raise cap on supply of subsidised cooking gas cylinders and the other to increase fuel prices, particularly diesel, by less than a rupee per month to pair it with market rates and eventually deregulate it in next 15 months.
The ministry has also proposed to reduce one-third subsidy on kerosene by 2014-15 and on cooking gas by a quarter in this year, government officials said. According to oil ministry's recent data, state oil firms are losing Rs 9 a litre on diesel, Rs 30.60 on kerosene and Rs 490 per cylinder on cooking gas.
The proposals will substantially reduce government's subsidy burden on diesel, kerosene and liquefied petroleum gas (LPG), officials said. The estimated fuel subsidy for 2012-13 is about Rs 166,000 crore, out of which the finance ministry has sanctioned Rs 30,000 crore and released the first installment of Rs 10,000 crore to state oil marketing firms this week.