While these subsidies, estimated at Rs 3,500 crore (Rs 35 billion) for the current financial year, were to be eliminated from the next financial year, the United Progressive Alliance government at the Centre is learnt to have taken the decision to extend the benefit of the subsidy scheme by another two years at least.

"The government that professes to implement reforms with a human face cannot but extend the subsidy scheme by another two years. Both LPG and kerosene being cooking fuels, have become a holy cow and no politician dare abolish the subsidy without the fear of becoming unpopular among the masses," said a senior bureaucrat.

An indication to this effect was given even by Petroleum Minister Mani Shankar Aiyar on June 15 when he said that "subsidies for LPG and kerosene will continue in 2004-05. But the original Cabinet decision was to phase out the subsidies in three to five years. So, in principle it is possible to have subsidies for another two years."

Finance minister P Chidambaram may also increase the Rs 22.58 per cylinder subsidy on cooking gas budgeted in the interim Budget for 2004-05 to about Rs 40 in the forthcoming Budget and that on kerosene to Rs 1.10 per litre from Rs 0.81 per litre budgeted.

Petroleum ministry sources said that despite Rs 20 per cylinder hike announced on June 15, excise duty cut and government subsidy of Rs 22.50, cooking gas selling price of Rs 261 in Delhi was short of cost by about Rs 80 per cylinder.

The sources said the prices of kerosene have not been raised despite the need for a Rs 4.43 per litre hike in view of the spurt in international prices.

Duties have also not been cut. Therefore, there is a clear case for hike in subsidies.

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