Piped gas too would be costlier.

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The oil ministry had previously wanted to raise the gas price in stages to $4.20 per mmBtu. It wanted rates paid to ONGC and OIL to be immediately hiked Rs 4,142 per thousand cubic meters ($2.32 per mmBtu).

The consumer price at this would have been 10 per cent higher at $2.55 per mmBtu. Thereafter, in three more installments, the rates were to be hiked to $4.20 per mmBtu.

However, on the insistence of the Union finance ministry, the oil ministry withdrew the proposal and moved a fresh one seeking to raise the price of the gas under APM to Rs 6,818 per thousand cubic meters or $4.20 per mmBtu, sources said.

Now analysts believe that prices of petrol and diesel too could be increased by up to Rs 2-3 per litre to offet the losses suffered by public sector oil companies.

Apart from the hike in natural gas prices, the government will also impose taxes and other levies and pipeline transportation charges. While the move will help the state-run firms breakeven in gas business, it would result in hike in electricity generation tariff and fertilizer production cost.

The finance ministry wanted the hike to happen in one go and not in stages, they said. Because of Wednesday's decision, ONGC would gain Rs 5833.78 crore (Rs 58.33 billion) more revenue a year.