New Delhi: Soon after the Assembly elections in five states get over next week, the government may hike diesel prices by up to Rs 3 per litre.

"An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is scheduled to meet on May 11 to mull on a hike in diesel prices," a top government official, refusing to be named, told reporters here.

A Rs 3-4 a litre hike in the petrol rates is also on the cards immediately after polling in the last phase of Assembly elections is completed on May 10.

"Petroleum Ministry officials on Tuesday discussed with the Election Commission the issue of raising prices before Assembly election results are announced on May 13. The Election Commission is believed to have cleared the move," he said.

An increase in domestic LPG prices may also be discussed at the EGoM meeting that will decide on how the oil firms will be compensated for their losses, he said.

State-owned Indian Oil, Bharat Petroleum and Hindustan Petroleum currently lose Rs 16.17 a litre on diesel and after adding local sales tax or VAT, the desired increase to make rates at par with international prices is Rs 18.19 a litre.

In view of Assembly elections in five states like West Bengal and Kerala, the companies had not even raised price of petrol, a commodity which was freed from government control in June last year.

Besides petrol and diesel, the three state oil firms lose Rs 29.69 a litre on kerosene and Rs 329.73 per 14.2 kg domestic LPG cylinder. Indian Oil, Bharat Petroleum and Hindustan Petroleum will "at current international crude oil prices lose Rs 180,208 crore in revenues on selling diesel, domestic LPG and kerosene below their imported cost in the 2011-12 fiscal", the official said.

The revenue loss, termed as under-recovery by oil firms, will be the highest ever, even more than what they lost in 2008-09 when crude touched a record high of USD 147 a barrel.

"The average price of the Indian basket of crude oil last fiscal was USD 85.09 per barrel, higher than the 2008-09 average when the government had cut customs and excise duty on
crude oil and products to check the impact of rising international rates on domestic markets," the official said.

Finance Minister Pranab Mukherjee has refused to cut customs and excise duty on crude this time to protect his projected fiscal deficit.

"The situation in the current fiscal will be worse, the three PSU oil marketing companies are losing Rs 540 crore per day on diesel, domestic LPG and kerosene sales," he said.

In 2008-09, the government had issues oil bonds worth Rs 71,292 crore to the three firms to make up for more than two- thirds of the Rs 103,292 crore revenue loss. Upstream oil
firms like ONGC provided another Rs 32,000 crore.

In the 2010-11 fiscal, the three firms lost Rs 78,202 crore, but so far, the government has provided only Rs 20,911 crore in compensation. The oil marketing firms lost Rs 2,227 crore on selling petrol below the imported cost during April and June before its price was freed from government control.