The price increases in this round are expected to include other fuel products (LPG and diesel), sources told NDTV.
State-run oil marketing companies are losing Rs 550 crore everyday on under-recoveries as a result of higher crude prices in the global markets.
They make a loss of Rs 17/litre on diesel sales, Rs 32.7/litre on kerosene sales, and Rs 347/cylinder on cooking gas sales every day. Timeline: The journey of India's petrol prices
At this rate, oil companies are left with no funds to pay for crude imports and that may cause paucity of petrol at fuel pumps.
The country’s biggest refiner, Indian Oil, reported a record quarterly loss of Rs 22,451 crore for the first quarter of the current fiscal year. The loss happened despite falling crude prices, since the price freeze on kerosene, diesel and cooking gas, and the weakening rupee, wreaked havoc on its bottom line.
Oil firms are seeking Rs 32,000 crore in compensation for the first quarter of the current fiscal year. The companies are not compensated for petrol sales since the government decontrolled petrol prices in June 2010.
An increase in fuel prices is necessary to cut down the government's subsidy. According to the present policy, the government will have to make good half of it by way of cash subsidy.
Prices of diesel as well as LPG and kerosene have not been increased since June last year, although the cost of production has jumped nearly 28 per cent, industry sources earlier said.
The UPA government, which has had a bumpy run in Parliament, and outside it, over several alleged scams, is likely to face the heat if it hikes petrol prices.
Already, key ally Trinamool Congress has said it will oppose any hike in fuel price.
"We are against any kind of price hike," TMC leader and Railway Minister Mukul Roy said.