The proposal was shot down mid-way, possibly because a government awaiting the poll verdict did not want too much blood on its hands (after the gory response to diesel prices.) The third product that tags along a subsidy, kerosene for the public distribution system (PDS), should logically also be considered for a price increase, but will probably remain at Rs 2.50 a litre. Even though file-pushers are known to concur on the need for a rise in kerosene prices, the new political bosses (who also happen to be the old political bosses) may not want to touch the ``poor man'sfuel.''

The Bharatiya Janata Party (BJP)-led coalition was steadfast in preserving the more than 200 per cent subsidy on kerosene, even though pricing reforms in petroleum require that the subsidy be hacked steadily.

It did not show any such qualm about LPG prices. The prices of cooking were increased by Rs 14 a cylinder in January. The subsidy element in a gas cylinder was actually reduced by Rs 24. On February 28, cooking gas became Rs 6 a cylinder cheaper because of a cut-back in excise and customs duty.

Since then, the subsidy element in LPG prices has more than doubled. According to the Oil Coordination Committee (OCC), the subsidy on LPG and kerosene together would tally up to Rs 12,000 crore by March end next year and leave a gaping deficit of Rs 3,400 crore in the oil pool account.

The deficit is what the OCC cannot pay the oil companies. A growing oil pool account deficit will scrape at the bottomlines of national oil companies (the Centre's milching cows at dividend-paying time), a situationthat would not be desirable to any government.

The schedule approved by the Union Cabinet for dismantling the administered pricing mechanism for petroleum products in 1997 calls for increasing kerosene prices as well. The fuel should turn dearer by 30 per cent for three consecutive years, till the subsidy on the retail price comes down to 33 per cent in the year 2002.

The subsidy on LPG should be rolled back at the rate of 33 per cent a year, till only 15 per cent remain in the year of total deregulation in oil prices and marketing. The remaining subsidies should be passed on to the Union Budget.

The Centre has somewhat (but not quite) kept up with that schedule. Prices of cooking gas have been increased, but the subsidy element has not been brought down. The subsidy on cooking gas is now more than 100 per cent, compared to roughly 60 per cent, when the pricing reforms began.

Oil Coordination Committee executive director MS Ramachandran revealed at the press meet to announce the diesel price hike,that every cylinder of LPG was subsidised by Rs 157. Considering that the retail prices vary from Rs 146 per cylinder in the Capital to Rs 170 a cylinder in Calcutta, the subsidy element is more than 107 per cent.

Since the last hike in LPG prices in January, international prices of propane gas (LPG) have gone up by more than 200 per cent to $ 170 a tonne in September from $ 80 around April. Since both oil refineries and fractioners (like the Gas Authority of India Limited) have to be paid an ``import-parity price'', the subsidy element of cooking gas has increased, instead of coming down. The Union government is on track in raising LPG prices by 30 per cent, but is a long way from trimming subsidies to 15 per cent by 2002. An increase in LPG prices, therefore, seem imminent, especially since policy-makers are not chary about raising cooking gas prices in principle.