New Delhi, Sept. 2 (PTI): The finance ministry is in favour of a hike in petrol and diesel prices to offset losses of oil firms. It has, however, agreed to issue oil bonds to insulate them from rising global crude prices.

“We would like (domestic fuel) prices to go up before oil bonds could be issued. But it is not a precondition for issuing the bonds,” a finance ministry official said.

State-owned oil firms had sought an immediate hike in petrol, diesel, LPG and kerosene prices as they are losing over Rs 185 crore everyday on the sale of these products. The government is exploring different options since the entire burden cannot be passed on to the consumer.

The recent decision of the Cabinet to offer a 5 per cent government equity in Oil India to Indian Oil and 2.5 per cent each to Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd was also aimed at giving these companies an option to sell the shares later so that they are compensated for their under-recoveries.

The source said while oil marketing companies wanted the ministry to compensate them for their earlier losses, the latter wanted it to be effective from a future date.

“Till when can we withhold the pressure? Ultimately, the government will have to take a decision. Informal discussions are on at the government level over oil bonds,” the source added.

The loss suffered by PSU oil firms on the sale of petrol, diesel, LPG and kerosene was estimated at Rs 52,162 crore.