The Ministry, however, is wary of the fact that if oil firms are allowed to raise petrol prices today or tomorrow, the political opposition of the unpopular move may force the hands of the Cabinet into not hiking diesel, LPG and kerosene rates when it may meet next week.
"There are no immediate proposals to raise prices of various oil products including petrol," Reddy told reporters.
With oil firms losing a record Rs 560 crore per day on sale of regulated diesel and cooking fuels and another Rs 16 a day on petrol, the Oil Ministry is pushing for raising rates once the Monsoon Session of Parliament ends today.
"We are of course facing crisis of unpredictable magnitude... Our oil companies will lose huge nearly Rs 200,000 crore (if rates are not raised)," Reddy said, adding that steps need to be taken to reduce this deficit. "We have to take some difficult, painful decisions."
On the political opposition to raising fuel rates, Reddy said fuel pricing was a classic case of "politics defeating economics".
Reddy said he had moved a note for the consideration of the Cabinet Committee on Political Affairs (CCPA) explaining the precarious situation facing the oil sector. "It is my duty as a minister to bring facts to the notice of CCPA. When will it meet, I have no idea".
State-owned fuel retailers are losing over Rs 5 per litre on sale of petrol, a commodity which was freed from government control in June 2010 but whose rates haven`t moved in tandem with cost. They sell diesel at a loss of Rs 19.26 a litre, kerosene at Rs 34.34 per litre and domestic LPG at Rs 347 per 14.2-kg cylinder.
"I have circulated terrible facts (about prices to Cabinet). Subsidy burden is very high... there is no escaping the very difficult and painful part of taking a decision on petroleum prices," Reddy said.
Besides hike in diesel, cooking gas and kerosene prices, the Oil Ministry is also seeking to limit supply of subsidised LPG cylinders to 4-6 per household in a year.
The ministry`s proposal to CCPA also includes barring households with income of more than Rs 50,000 per month or Rs 6 lakh in a year from getting subsidised LPG cylinders.
The Cabinet committee is likely to consider the hike on the first occasion it meets.
"It is for the Cabinet Secretary to fix the meeting," Reddy said, when asked when the CCPA was supposed to meet.
Indian Oil Corp (IOC) Chairman R S Butola said even though the oil companies were free to raise petrol prices, they hold "consultations" with the government.
"We are losing Rs 16 crore per day on petrol," he said, adding that the three oil marketing companies were holding discussions on the timing of raising petrol price with the government.
Diesel, domestic LPG and PDS kerosene rates have not been changed since June 2011 even though cost of production has soared 28 per cent.
Oil PSUs are losing Rs 560 crore per day on sale of diesel and cooking fuel at present, and are forced to resort to short-term borrowings to meet funds needed for importing crude oil (raw material for making fuel).
Borrowings of the three state fuel retailers, who in the first quarter reported biggest net losses in India`s corporate history, shot up to Rs 1,57,617 crore at end of June from Rs 1,28,272 crore as on March 31.