Top government officials told The Financial Express that excise duties on LPG, kerosene and diesel are likely to be slashed by another 4 per cent each. As result of this reduction, LPG will become cheaper by Rs 9 a cylinder, diesel by 44 paise a litre and kerosene by 35 paise a litre.

The impact of these duty cuts will have to be borne by the revenue department, which will have to forgo Rs 625 crore as revenue loss in the next five months.

However, sources said that the finance ministry could easily absorb this loss, as it was already collecting an additional Rs 8,000-crore revenue on account of the surge in the international crude oil prices.

Officials said that the Prime Minister has only two options to tackle the proposed rollback in petro-product prices. He can do this by either reducing the landing or the basic issue price of petroleum products.

This would bring down the retail selling price of the petroleum products, but at the same time, will also have a direct impact on the oil pool deficit, which has been burgeoning over the past few months. Therefore, this does not seem to be a a viable option.

The other option is to further reduce the excise duty being levied on petro-products. This will help in reducing the retail prices of the petroleum products without altering the ex-storage price excise duties.

"As the finance ministry will have to forgo the estimated Rs 625 crore, they may be reluctant to do this. However, in real terms, this is not a loss, as owing to high crude oil prices, the revenue department would be collecting higher amounts than what was anticipated by them in the budget estimates," officials said.

"Even after the recent reduction in duties, the revenue receipts from customs and excise and cess on indigenous crude oil are estimated to be around Rs 39,000 crore as against the budget estimates of Rs 31,000 crore," officials disclosed. The revenue receipts may further move up if the current trend of soaring international crude oil prices at over $30 a barrel continues, officials said.

Sources disclosed that Prime Minister Mr Atal Bihari Vajpayee has already had meetings with finance minister Mr Yashwant Singh and petroleum minister Mr Ram Naik, over handling the proposed rollback of petro prices. He is likely to make an announcement on the rollback issue in the Cabinet meeting on Thursday.

The existing excise duty on diesel stands at 12 per cent, while that on kerosene and LPG is 8 per cent each. While announcing the recent price hike, the government had announced customs and excise duty cuts. The excise duty on diesel was reduced from 16 to 12 per cent and that on petrol from 32 to 16 per cent. Customs duties on crude oil were also brought down from 15 to 10 per cent. However, there was no change in the excise duty on kerosene and LPG.

It may be noted here that after the recent price hike, the prices of diesel went up by 18 per cent, from Rs 14.05 a litre to Rs 16.55 a litre in Delhi.

LPG prices were raised by 19 per cent from Rs 196.55 a cylinder to Rs 232.75 a cylinder. The impact on kerosene was maximum, where prices were raised by almost 50 per cent from Rs 5.55 a litre to Rs 8.36 a litre.

Even if the government implements the proposed excise duty reductions, the consumer will be marginally benefitted as this move is aimed to cool down the Trinamool Congress leader, Mamta Banerjee, than the common man.