With today's decision, consumers will get five subsidised cylinders instead of the previously mandated three in the period up to March 31, 2013. From April 1, 2013 they will get nine cylinders in a year.
Moily said there will be no change in price of LPG and kerosene.
The increase in the LPG cap would mean an additional subsidy outgo of Rs 9,300 crore annually.
On diesel front, sources said the government has kept the quantum of hike and the timing a secret to avoid petrol pumps stopping sales to make quick profits.
Oil Secretary G C Chaturvedi said CCPA has authorised oil firms to make "small changes over a period of time".
"There was no discussion on the quantum of price increase or the period over which these changes are to be effected. It has been left to the oil companies," he said.
He, however emphatically stated that the government had not deregulated diesel prices. "If we are to deregulate, then diesel price will have to be raised by Rs 9.60 per litre, which is not the case. Only a small quantum of change has been permitted over a period of time."
Asked if it was partial deregulation, he said "it wasn't even partial deregulation." The government, he said, will continue to subsidise diesel, cooking gas and kerosene.
"The finance ministry will meet all of the under recoveries (loss)," he said.
State-owned oil companies sell diesel at a loss of Rs 9.60 per litre, kerosene at Rs 30.64 a litre and LPG at Rs 490.50 per 14.2-kg cylinder.
For the full 2012-13 fiscal, they are projected to lose about Rs 165,000 crore.
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VIVEK RAJPAL, STRATEGIST, NOMURA, MUMBAI
"Given oil companies still need to take the approval from government authorities, I am not too excited about this news. Though the first market reaction is positive, I really doubt the sustainability of such a reaction based on this news, especially once markets take a look at details."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI "It's better to make step-wise