Government may impose a 25 per cent cess on big diesel cars and charge bulk users other than railways and state transport corporations Rs 22 a litre more for diesel as part of a dual fuel pricing policy.

"Big car owners do not deserve subsidised diesel. We want them to pay market price but it will be difficult to ask petrol pumps to charge them higher than other vehicles. So it  is being debated if a 25 per cent cess on the car price may be imposed on big cars," a top petroleum ministry official said.

This is part of a dual diesel pricing proposal the ministry is preparing for the Cabinet, he said. "Diesel to industrial users other than railways and state transport departments will be sold at market price of Rs 57 a litre."

At present, diesel in Delhi costs Rs 34.86 a litre.

Industrial units like power generators in IT industry find subsidised diesel cheaper than freely priced fuel oil and naphtha, pushing demand that has forced refiners import the fuel to meet the requirement.

"The idea is to limit sale of subsidised diesel to transport and agriculture sectors only," he said, adding the petroleum ministry was holding consultations with various stakeholders and will move a Cabinet note this month.

While the cess on big diesel cars would give about Rs 150 crore (Rs 1.5 billion) additional revenues annually, charging bulk users higher price would reduce loss of state retailers Indian Oil [Get Quote], Bharat Petroleum and Hindustan Petroleum by Rs 14,000-15,000 crore (Rs 140-Rs 150 billion).

"More than half of the projected Rs 1,65,300 crore (Rs 1,653 billion) revenue loss on sale of petrol, diesel, domestic LPG and kerosene this fiscal is on account of diesel sales," the official said.

Diesel demand in April-July had grown by 18 per cent, with bulk of the growth coming from industrial users like power plants.

The official said the proposal under consideration is a watered down version of what the industry was seeking. IOC, BPCL [Get Quote] and HPCL [Get Quote] had sought all bulk users including railways to be charged a higher price to reduce their revenue loss by Rs 27,202 crore (Rs 272.02 billion) in 2008-09.

"We are sensitive to the burden on common man and since railways is used by common people for transportation, we have decided to exempt it from higher fuel bill," he said.

Sources said the power sector had seen a whopping 152 per cent rise in demand in the first quarter to 53,000 tons, while fisheries and marine sector had seen a near-40 per cent growth.

The three retailers at present lose 13.69 a litre on diesel sales.

This unprecedented demand growth has seen domestic output fall short of the requirement and a total of 4.14 million tons of diesel may be required to be imported in 2008-09.

Of this, 1.267 million tons has been imported in April-July.

Behuria said while transport and agriculture demand for diesel had grown by 10-12 per cent, consumption by power producers and other industries had risen 30 per cent.