The four public sector oil marketing companies are expected to increase petrol and diesel prices by at least Re 1 a litre from the midnight of May 31 when the two auto fuels are due for price revision.

While briefing the new Petroleum Minister Mani Shankar Aiyar on Monday about the functioning of the Ministry and the issues before it, officials are learnt to have told him about the inevitability of the price hike.

Aiyar was also told that officially the Ministry has no control over retail prices of petrol and diesel and the oil companies are free to revise them in tandem with import parity prices.

However, it is common knowledge that the oil companies have detailed discussions with the ministry before revising prices.

The minister was also told that the prices of the two fuels were last revised on January 1 and that the international prices of crude have gone up by $6 a barrel since then.

This has resulted in the oil marketing companies in buying the two fuels at a higher cost and selling them at a lower cost.

Aiyar was also informed that the oil marketing companies have incurred an under-recovery of around Rs 900 crore (Rs 9 billion) between January and May because of the spurt in the international prices of crude and stationary retail prices of the two petroleum products.

While the oil companies have been demanding a hike of around Rs 4-5 a litre, officials in the Petroleum Ministry are of the view that the new government may agree to a modest Re 1 a litre increase in the prices of the two fuels to provide some relief to the oil companies.

The minister is learnt to have made no comment to the officials on the price hike, but officials are confident that despite stiff opposition from the Left Front, the oil companies may be allowed to effect the modest price hike.

Meanwhile, the petroleum refinery sector logged 13.2 per cent growth in April 2004 compared to 6.9 per cent the year ago.

Crude petroleum production also grew 10.7 per cent to reach 2.848 million tonnes last month. Crude production had decreased 1.9 per cent in April last year.