Indian government officials have said that the government is considering plans to increase the prices of diesel and kerosene, which are controlled by the authorities, in a phased manner in order to lower the burden of fuel subsidy on the state.

There are indications that the government might be looking to increase the price of diesel by 10 rupees a liter over a period of10 months, or by 1.0 rupee every month. The unnamed official also said that the government might increase the price of kerosene by 10 rupees a liter in two years.

State-run Oil Marketing Firms, Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum are required to sell diesel, kerosene and cooking gas at a price that is controlled by the government in the country. The loss suffered by these firms by selling the fuel below market prices is partly compensated by the government.

Official estimates shows that the three oil companies lose Rs. 9.28 on every liter of diesel and 31 rupees on every liter of kerosene sold in the country at discounted prices. The government had increase the prices of diesel recently to reduce the subsidy burden and align prices to the international prices.

Indian Prime Minister Manmohan Singh Thursday said energy was underpriced in India and that there was a need for "some phased price adjustment." The country's government has a huge fiscal deficit, which is expected to be around 5.3 per cent of the national GDP, mainly due to huge amount of subsidies being offered in fuel and fertilizers in the country.