Petrol price up by Rs 3.73, diesel by Rs 2:

Government has decided to raise petrol and diesel prices, Oil Minister Murli Deora said on Friday, as part of a plan to move towards a market-determined fuel price regime. According to initial reports, petrol prices will go up by Rs 3.73 per litre, diesel by Rs 2 per litre. LPG also goes up by Rs 35 per cylinder. Kerosene prices will also be hiked by Rs 3 per litre, however it will not be market-driven. The EGoM agreed to free diesel prices partially. However, petrol prices have been deregulated. The hike in prices will be effective from midnight.

"Of course," said Oil Minister Murli Deora, when asked whether the government hiked petrol and diesel prices, without giving further details.

The decision follows a ministerial panel meeting on freeing up petrol prices and cutting subsidies on diesel, kerosene and cooking gas, to help rein in the fiscal deficit, which is projected at 5.5 percent of the gross domestic product in 2010/11 and free up revenues for other programmes.

The move will help boost profits of state-run oil firms that have been losing revenue from government-set lower prices.

Petroleum Minister Murli Deora had asked states to lower sales tax on petrol and diesel to cushion consumers from the impact of fuel price hike.

State-owned Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum currently lose Rs 203 crore per day on selling fuel below imported cost.

Earlier this month, the government deferred a decision on raising fuel prices, the second time in a year it tripped on pushing the politically sensitive reform measures that could help trim a budget deficit. Fuel accounts for a quarter of India's estimated $25.6 billion subsidy bill.

India's headline inflation rate was 10.16 percent in May, and the rise in fuel prices could upset Prime Minister Manmohan Singh's calculations that this could come down to between 5 percent and 6 percent by December.

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