The Cabinet, scheduled to meet on Thursday, may reduce petrol price by Rs 5 a litre, diesel by Rs 3 per litre and domestic LPG by Rs 25 per cylinder, giving relief to the common man and further easing inflationary pressures, he said.

The state-run oil companies are currently making Rs 9.70 a litre profit on sale of petrol, Rs 3.70 a litre on diesel, but are loosing Rs 31.70 per LPG cylinder and Rs 11.69 on every litre of kerosene.

"There is also a proposal for freeing the retail fuel prices from administrative control after a mechanism to compensate for the losses on LPG and kerosene is devised," he said.

The government will mop up additional revenues by increasing excise duty on petrol and diesel by a minimum of Rs 1 per litre.

For losses on LPG and kerosene, the Cabinet may decide on issuing a Rs 30,000-crore additional oil bonds this fiscal.

Petrol and diesel prices were cut only in December by Rs 5 a litre and Rs 2 per litre, respectively, as global crude prices fell to four-year lows.

International oil prices have been hovering at that level for a while and have prompted the government to think of another round of price reduction.