Petrol and diesel will cost up to Rs 3.73 per litre more, households will

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have to pay an additional Rs 35 per cylinder and poor man's cooking medium kerosene will be dearer by Rs 3 a litre from today, the government said here.

In a major decision to bring petroleum products in line with market rates, the government today freed petrol from all pricing controls and hiked diesel prices by Rs two a litre, Oil Secretary S Sundareshan announced after the meeting of the Empowered Group of Ministers.

Even diesel prices will be eventually freed of alladministrative controls, Sundareshan said.

The decisions, taken by the EGoM headed by Finance Minister Pranab Mukherejee, were timed appropriately to take advantage of relatively lower global crude prices, which are hovering around USD 77 a barrel.

Besides, this would also help cut down on the government's huge subsidy bills, as also relieve the oil marketing PSUs of staggering burden on account of selling these fuels much below the market prices.Sundareshan said that the government would, however,continue to "heavily subsidise" the cooking fuels.

Oil Minister Murli Deora had, on more than one occasion, briefed the Prime Minister Manmohan Singh and Mukherjee on the crisis that would befall oil PSUs if no decision was taken on hiking prices.

The decision would cause core inflation, already in double digits, to shoot up further.

In May, WPI-based inflation provisionally entered double digits at 10.16 per cent.

State oil firms currently lose about Rs 215 crore per day on selling fuel below the imported cost. At present, petrol is being sold at Rs 3.73 a litre below its cost, diesel at a loss of Rs 3.80 per litre, kerosene at Rs 18.82 a litre and domestic LPG at a discount of Rs 261.90 on every 14.2-kg cylinder