New Delhi: Under pressure to keep its finances under control, Finance Minister Pranab Mukherjee on Sunday said the Government is keen to free prices of diesel and cooking gas (LPG) but keep subsidizing kerosene used by poor.

"Petrol we have done (decontrolled). Diesel, kerosene and LPG we want to do it. (But) Kerosene we may have to provide some subsidy because people who have no access to electricity, use kerosene as lighting", he said in an interview to news agency.

The government, he added, wants to link the prices of the domestic petroleum products with those prevailing in the international market.

While the prices of petrol are linked to market rates, the Government directly and indirectly compensates the oil marketing companies for losses on account of sale of diesel, kerosene and LPG through subsidies and oil bonds.

In June while increasing prices of kerosene, diesel and LPG, the government had slashed customs and excise duties on petroleum products to cushion the hike in rates and thus sacrificing annual Rs 49,000 crore revenue.

Referring to the recommendations of the task force headed by Unique Identification Authority of India (UIDAI) Chairman Nandan Nilekani on direct transfer of subsidy, he said, "The task force is looking into it. After the pilot projects being launched they will come out with the recommendations reviewing the pilot project outcomes".

The task force has suggested to the government launching of pilot projects for direct transfer of subsidy in case of kerosene, cooking gas and fertilizer with a view to curbing pilferage and helping the poor.  Pilot projects for transfer of a direct cash subsidy will be launched in seven states -- Tamil Nadu, Assam, Maharashtra, Haryana, Delhi, Rajasthan and Orissa -- from October, according to the roadmap suggested by the Unique Identification Authority of India (UIDAI).

On the possibility of international crude prices moderating in the short run, Mukherjee said it will depend on recovery in Europe and the US and the decision of the Organization of Petroleum Exporting Country (OPEC) to raise production.

"It is difficult to say right now because it depends on two things -- how quickly European and US recovery (takes place)... If the recovery is quick then there will be more demand for oil. In that case prices may firm up", he added.

On the other hand, Mukherjee said, "If they (OPEC) again decide not to enhance the production then it will have its adverse impact (on oil prices)".

The third factor was the US government's decision to offload oil, Mukherjee said, adding, "If they release from their strategic reserves some more, then very limited easing could take place".

In order to cool prices, the US government released about one million barrel of oil per day in June.  The crude oil prices in the international market, he said, has moved up from USD 110 a barrel in June and to USD 116-118 per barrel in July.

The increase, he added, would have its impact on India as the country imports about three-fourth of its requirement.

The Government spends about Rs 73,637 crore a year on fuel and fertilizer subsidies.

The Government is likely to spend about Rs 82,000 crore on food subsidy this fiscal and the bill may go up to Rs 95,000 crore once the National Food Security Act comes into play.

The Government proposes to keep the fiscal deficit at 4.6 per cent of GDP, down from 4.7 per cent in the previous year.

(Agencies)