Prime Minister Manmohan Singh may deliberate on freeing auto fuel prices when he reviews the financial health of state-run oil firms with finance minister Pranab Mukherjee and oil minister Murli Deora on January 13.

Planning Commission deputy chairman Montek Singh Ahluwalia and former Planning Commission member Kirit S Parikh, who heads an expert committee on fuel pricing, may join the deliberations, official sources said.

Officially the meeting has been called to take stock of the petroleum sector, especially the financial position of PSU oil retailers, they said.

The issue of freeing petrol and diesel prices from the Government control may come up for discussion as Indian Oil [Get Quote], Bharat Petroleum and Hindustan Petroleum are projected to lose Rs 45,000 crore (Rs 450 billion) on selling the two auto fuel and domestic LPG and kerosene at rates below cost during the current fiscal.

Sources said the government had failed to provide the promised oil bonds to make up for the revenue loss on LPG and kerosene, in the absence of which HPCL [Get Quote] and BPCL [Get Quote] reported losses in Q2 while IOC barely scrapped through.

Besides the three, private fuel retailers Reliance Industries [Get Quote], Essar Oil [Get Quote] and Shell have also sought freeing of petrol and diesel prices to given them level playing field.

Freeing of auto fuel prices would result in petrol prices being raised by Rs 3.49 a litre and diesel by Rs 2.38 per litre.

Sources said the January 13 meeting would discuss the current mechanism to share revenue losses incurred by the state-owned oil retailers with upstream companies like ONGC [Get Quote] and the government.

Besides reviewing both upstream and downstream sectors, the meeting is likely to hold preliminary discussions on the findings of the Parikh committee, they said.

The group, which is examining government's pricing policy for petrol, diesel, LPG and kerosene, is likely to give its final recommendations on a sustainable pricing system by end January.

Deora had earlier this week met Prime Minister seeking release of Rs 20,872 crore (Rs 208.72 billion) of oil bonds towards compensation for the revenue lost by IOC, BPCL and HPCL on selling LPG and kerosene at below cost during the first three quarters of current fiscal.

The revenue they lose on selling petrol and diesel is made up by upstream firms Oil and Natural Gas Corporation and Oil India Ltd.

Sources said this compensation mechanism as well as the level of government subsidies would be deliberated at the meeting next month. Heads of ONGC, IOC, HPCL, BPCL, OIL and GAIL India Ltd [Get Quote] are likely to attend the meeting.