Indian Oil Corporation, the country's largest fuel retailing firm, has demanded a hike in security deposit on cooking gas LPG cylinders to Rs 900 in view of the spurt in steel prices.

Domestic LPG customers currently pay a onetime security of Rs 650 per cylinder at the time of taking the connection. This, IOC says, is not commensurate with the cost and should be hiked.

IOC chairman M S Ramachandran at a recent presentation to the Petroleum Minister Mani Shankar Aiyar stated that steel prices have risen by over 37 per cent to Rs 24,000 per tonne from Rs 17,500 per tonne previously.

The average cost of serving came to Rs 910 per customer and the company was loosing heavily on raw material cost.

Sources said Ramachandran also demanded differential pricing of petrol and diesel for coastal and inland locations factoring the actual freight (in moving the goods).

Private players like Reliance Industries and Essar Oil were denting PSU market share in coastal areas as the state-run firms have to price petrol and diesel at artificially higher price in these locations to match the sale price of inland locations. The inland location price is calculated by factoring in the cost of transporting the fuel from the coast and the same price is applied on coastal locations also even though there is no freight cost involved.

IOC demanded that actual freight for moving the fuels be built up in the price of petrol and diesel in inland location. In effect, petrol and diesel will cost more in Delhi than in Mumbai, sources said.

Ramachandran said private players were able to offer discounts in coastal locations due to the build up of freight element in the PSU price, which otherwise should be not be there.

If the proposal of differential pricing is accepted, coastal locations will see lower fuel price than inland parts, sources said.

IOC also asked the government to give level playing field to the public sector units in setting up petrol stations.