The government will announce an increase in the retail prices of liquefied petroleum gas for domestic use in the Union Budget for 2003-04. The increase will be around Rs 40 a cylinder.

Though public sector oil marketing companies are pressing for an early increase in the retail price of domestic LPG, the government does not seem inclined to touch the politically sensitive issue before the elections to four Assemblies on February 26.

Sources in the petroleum ministry said it was highly unlikely that the prices would be revised before the Budget.

Since the Budget will be presented to Parliament on February 28, the government is of the view that the price revision can be taken up only as a Budget exercise.

An increase of Rs 40 a cylinder of domestic LPG was announced in the 2002-03 Budget by the then finance minister Yashwant Sinha.

However, this was rolled back by Rs 20 a cylinder after intense political pressure.

Petroleum ministry sources said the four oil marketing companies -- Indian Oil Corporation, Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd, and IBP Ltd -- had accumulated Rs 3,000 crore (Rs 30 billion) in losses during April-December 2002 because of the fixed subsidy being paid by the government and the stagnant LPG and kerosene prices.

They said though the government was paying a subsidy of Rs 70 on every cylinder of LPG and Rs 1.80 a litre on kerosene, the oil companies were losing Rs 50 on a cylinder of LPG and 80 paise a litre on kerosene because of the spurt in the international prices of crude and petroleum products.

The sources said the books of the oil marketing companies were still showing notional profits because the stocks at the beginning of the current financial year, which were purchased when crude prices were ruling around $20 a barrel, are now being re-valued at $28 a barrel.

In case crude prices again dip to $20 a barrel in March, the books will reflect substantial losses.

The government is learnt to be dragging its feet over the price increase since it is of the view that most of the middle class, and even the poorer sections of society, use LPG for cooking.

Any hike in its prices could have an adverse impact among a large chunk of voters.

The oil industry, on the other hand, is of the opinion that the middle class will not mind paying a little more for LPG. However, the government needs to inform the users of the compulsions under which it is forced to raise its prices.

Run-up to the Budget 2003