New Delhi, May 24 (IANS): Welcoming the hike in petrol prices, industry organisations Thursday called for differential pricing of diesel and liquefied petroleum gas (LPG) to curb ballooning fuel subsidy.

"The current under-recoveries in diesel and LPG require immediate action to ensure that dual pricing of diesel is introduced, where non-farm use of diesel should have minimum subsidy," said Chandrajit Banerjee, director general of Confederation of Indian Industry (CII).

Banerjee said the huge subsidy on urban use of LPG should be phased out.

He said the rationalisation of petroleum prices is one of the most important reforms that industry has been advocating.

State-run oil firms Wednesday announced the biggest ever single-shot hike in petrol prices. Petrol prices have been raised by an average of about Rs.7.50 per litre.

The industry lobby said the hike in petrol prices would not resolve the issue of ballooning fuel subsidy and immediate action needs to be taken on diesel and LPG pricing.

Welcoming the hike in petrol prices, the Federation of Indian Chambers of Commerce and Industry (FICCI) said the petrol price hike would only partially cover the under-recoveries and the government needed to act on LPG, diesel and kerosene subsidies too.

The government provides subsidies of Rs.31 per litre on kerosene, Rs.13.64 per litre on diesel and Rs.479 for each 14.6 kg cylinder of LPG.

Oil marketing companies are losing over Rs.500 crore per day on sale of diesel, kerosene and domestic liquefied petroleum gas (LPG).

An empowered group of ministers (EGoM) is expected to meet Friday to take a decision on hike in prices of diesel and LPG.