“Petrol and diesel prices will be increased from midnight tonight,” Petroleum minister Murli Deora told reporters here. The CCPA decided to raise the quantum of oil bonds to be issued to state-run oil retailers to partly compensate them for selling auto and cooking fuel below cost, he said.

Petroleum secretary M S Srinivasan said that the Rs 2 per litre increase in petrol prices would give Rs 180 crore a month additional revenue to the public sector oil companies while the Re 1 a litre hike in diesel would fetch Rs 360 crore a month. “For the remaining part of the fiscal, we anticipate additional revenues of Rs 840 crore” he added.

State-run firms now lose Rs 10.57 per litre on petrol, Rs 11.56 on diesel, Rs 19.89 on kerosene and Rs 331 on each LPG cylinder. At present, 42.7 per cent of the under-realisation on petrol, diesel, LPG and kerosene is met by the government through issuance of oil bonds. This percentage has now been raised to 56-57, Srinivasan said.

The Government, in this financial year, will issue Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) oil bonds worth over Rs 40,212 crore at enhanced rates. Upstream firms like ONGC and GAIL will contribute 33 per cent (Rs 23,700 crore), while the remaining Rs 71,808 crore under-realisation will be borne by retailers.

Officials said finance minister P Chidambaram opposed the Petroleum Ministry’s demand for a Re 1 per litre reduction in excise duty on petrol and diesel. Earlier, a Group of Ministers (GoM) headed by external affairs minister Pranab Mukherjee had left a decision on fuel prices to the Cabinet after the panel was vertically divided on the issue. Petroleum minister Murli Deora insisted on a duty cut rather than price hike, while finance minister P Chidambaram was opposed to any pre-Budget duty rejig.

Petrol and diesel prices were last raised in June 2006, when crude oil was at $67 a barrel. It is at $92 a barrel this year.