After announcing a hike in railway fares, the government is now set to take a tough decision on raising fuel prices as early as this week or next week. A hike of Rs 4.50 per litre in diesel prices and that of Rs 100 per cylinder for LPG prices is expected.

Planning Commission Deputy Chairperson Montek Singh Ahluwalia on Thursday said the government was looking to hike GDP growth to 8 per cent in two to years and was willing to take tough decisions. He said the decision to increase fuel prices will be taken in a week or two.

The Oil Ministry has made a proposal to Cabinet to raise diesel prices and increase the number of subsidised LPG cylinders available to households to nine a year from the current cap of six, two oil ministry sources said on Wednesday. The proposal has got the approval of both Prime Minister Manmohan Singh and UPA Chairperson Sonia Gandhi.

The government argues this would help counter Rs 160,000 crore deficit. India, which imports more than 80 per cent of its fuel needs, liberalised petrol prices in June 2010 but continues to regulate diesel prices to protect the poor. Prime Minister Manmohan Singh has recently said the country must gradually bring local fuel prices in line with global prices.

Manmohan Singh had warned that the government must raise diesel, kerosene and cooking gas prices in a phased manner as India’s fuel prices are well below international prices. “Energy remains under priced in our country, with coal, petroleum products and natural gas prices well below international prices.

To meet our target of rapid, inclusive and sustainable growth we must undertake a phased rationalisation of energy prices to bring them in line
with world prices,” he had said on Monday.earlier on Wednesday, Railway Minister Pawan Kumar Bansal announced a hike in railway fares, the first in the last 10 years. The new fares will be effective from midnight of January 21, 2012.The Railway Minister also clarified that the fares will not be hiked in Railway Budget.