Retail prices of domestic cooking gas and kerosene will fluctuate in step with global crude oil prices after adjusting the flat rate of subsidy on the two mass cooking fuels, the pre-budget Economic Survey said on Thursday.

"Subsidies on kerosene for public distribution system and domestic LPG are on a specified flat rate basis, from April 1, 2002 onwards and are borne by the Consolidated Fund of India. These subsidies will be phased out in next 3 to 5 years," the survey said.

Finance ministry had in budget for 2002-03 provided for a fixed subsidy regime for LPG and kerosene beginning April 1, 2002 upon dismantling of administered pricing mechanism. The total subsidy outgo was budgeted at around Rs 4,500 crore.

But with the rise in international oil prices, the fixed subsidy payable on a cylinder of LPG was upwardly revised to Rs 67.75 while that on a litre of kerosene was put at Rs 2.45.

Presently, the retail selling price of domestic LPG at Rs 241.20 per cylinder (in Delhi) was about Rs 160.05 per cylinder lower than the prevailing international prices. Similarly, the kerosene price of Rs 9.01 per litre was about Rs 5.08 per litre lower than import parity price.

"After adjusting the flat rate of subsidy, the retail prices of PDS kerosene and domestic LPG will fluctuate in keeping with the price of crude oil in international markets," the economic survey said.