The Congress is yet to form a government at the Centre but it faces the prospect of being credited with a highly unpopular decision of a one-rupee per litre hike in petrol and diesel prices.

Though the public sector oil companies are demanding an increase of Rs 4 per litre and Rs 5 per litre in the price of petrol and diesel, the hike would be a marginal Re 1 per litre in each of the two products, effective midnight of May 15 and 16, sources in the petroleum ministry said.

The economic reasoning for the small rise is that the sharp jump in international crude oil price since last month has eroded the over-recoveries from petrol and diesel to subsidise LPG and kerosene. Petrol and diesel prices were last revised on January 1, 2004 and since than crude oil prices have jumped by over $6 a barrel.

As for political approval, sources said the need for a price hike has been conveyed to the government-in-waiting.

"The hike in petrol and diesel prices can be deferred for another fortnight if the other constituents of the proposed Congress-led government, that will be heavily dependant on the Left for its survival, press for it," they said.

The new government will also be handed over the task of deciding on the subsidy on cooking gas (LPG) and kerosene. Due to unchanged prices of the two products in the last two years and reduction in budgetary support to one-third from April 2004, the under-recoveries on account of the two products is estimated at nearly Rs 14,000 crore (Rs 140 billion) in 2004-05.

To sustain normal margins, price of kerosene would have to be raised by Rs 5.68 per litre and Rs 101.79 per 14-kg cylinder of cooking gas.

Sources said the Vajpayee government had put on hold any increase in petrol and diesel prices necessitated due to rise in cost of raw material (crude oil) so as not to alienate voters.

Public sector oil firms - Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd - said price of kerosene will have to go up by a whopping Rs 5,677.12 per kilolitre (Rs 5.68 per litre) and that of LPG by Rs 7,167.97 per tonne (Rs 101.79 per cylinder) in May, 2004.

This increase is over and above the fixed subsidy dispensed by the exchequer of Rs 815.12 per kilolitre for kerosene and Rs 2.85 per cylinder for LPG.

"The new petroleum minister will face a Hobson's choice ahead when he discovers that keeping the electorate pleased will conflict with the fiscal compulsions of the oil marketing companies," sources added.