It is also likely that a decision on raising petrol and diesel prices will be postponed. The petroleum ministry was planning a new pricing policy for the sector that might include changes in the duty structure, petroleum ministry officials said.

The CCEA is also slated to discuss Indian Oil Corporation's [Get Quote] proposal to opt out of Transchart, the Centre's ship chartering wing and instead put in place its own chartering arrangement.

The proposal was opposed by Shipping Minister T R Baalu when it came up for discussion in the CCEA two weeks ago.

The settlement of the Dabhol issue, senior officials said, was in the final stages and would cost $460 million to dispose all the claims of offshore lenders, while the settlement with GE-Bechtel was estimated to be in the region of $250 million.

The CCEA is expected to finalise the quantum of guarantee for restarting the Dabhol project through a settlement with shareholders GE-Bechtel and the foreign lenders.

While the Centre is willing to provide a Rs 3,600 crore (Rs 36 billion) guarantee, the lenders want additional guarantees to take fresh exposure to the second phase of the project.

At a meeting on Thursday, finance ministry officials discussed the modalities for the second phase where National Thermal Power [Get Quote] Corporation, Gail (India) Ltd and the Maharashtra State Electricity Board are to chip in with equity contribution of Rs 500 crore (Rs5 billion) each.

While the State Bank of India [Get Quote] was open to the idea, ICICI Bank [Get Quote] and IDBI Ltd were opposed to the proposal and have sought additional government guarantee to raise funds for financing the second phase of the 2,144 mega watt project. The finance ministry was not amenable to additional guarantee.

The Empowered Group of Ministers on Dabhol headed by defence minister Pranab Mukherjee also met earlier this week to discuss the final modalities for restarting the plant lying idle for four years.

Officials said that GE-Bechtel have also initiated talks with NTPC and Gail for restarting the first phase of DPC.

Petrol, diesel to cost Rs 5 more?

A proposal to ensure improved supply of kerosene through the establishment of distribution networks in each block is also on the Cabinet's agenda.

On petroleum product prices, the demand by oil companies to raise diesel prices by Rs 5.18 a litre and petrol by Rs 4.69 a litre was unlikely to be accepted also due to the current resentment against value-added tax.

The Crisis Over VAT

Petroleum products do not come under VAT but introduction of VAT regime in 19 states was seen as leading to price increase in other products. 'Any increase in retail price of petrol and diesel at this point will be unpopular,' said an official.