New Delhi: The government may raise fuel prices for the first time in 18 months as state-owned refineries are set to lose as much as Rs70,000 crore selling petrol and diesel below cost. A panel of ministers will study fuel prices and may recommend an increase on 14 December, M.S. Srinivasan, secretary at the petroleum and natural gas ministry, said on Monday.

Crude oil has soared to a record this year, straining finances at Indian Oil Corp. (IOC), the nation’s biggest refiner, and its counterparts that are forced to sell petrol and diesel at below-market prices. Still, the rupee’s best performance against the dollar in more than three decades has cushioned the impact of importing crude.

On Monday, the refiners’ shares rose. IOC gained 4.47% to close at Rs617.05 on the Bombay Stock Exchange. Hindustan Petroleum Corp. increased 3.24% to Rs308.85 and Bharat Petroleum Corp. gained 1.14% to Rs425.50.

The Reserve Bank of India (RBI) had said on 27 November that Asia’s third largest economy will have to raise prices if crude oil extends gains. Crude oil has fallen 11% since touching a record $99.29 (Rs3,902) a barrel on 21 November. Crude oil for January delivery declined as much as 53 cents to $87.75 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

Prime Minister Manmohan Singh’s government caps petrol and diesel rates to curb inflation and protect the poor who make up half the country’s 1.1 billion people. Prices of diesel and petrol were last raised in June 2006 and liquefied petroleum gas, used as a cooking fuel, has been unchanged since April 2005.

Singh said on 8 November that India must cut “mounting" subsidies on food, fertilizer and oil that will touch Rs1 trillion this year. The government needs to “restructure" subsidies, he had said, without providing details.