The union cabinet is likely to discuss a petroleum ministry proposal for freeing petrol prices from government control and a moderate increase in diesel, cooking gas and kerosene rates on Thursday.

Petroleum minister Murli Deora held consultations with key allies DMK and Trinamool Congress on the subject ahead of the meeting on Wednesday morning.

Deora met A Raja,telecom minister from key UPA-ally, DMK, and spoke over phone to Trinamool Congress leader and railway minister Mamata Banerjee explaining the "precarious" situation that PSU oil firms would find themselves in, if fuel prices were not hiked.

Sources said that both Raja as well as Banerjee were non -committal on the stand that their parties may take if the proposal of freeing petrol prices - that would lead to a price increase of Rs 4.72 a litre - comes before the cabinet tomorrow.

Already, opposition from key allies has seen Deora drop the proposal on freeing diesel prices that would have resulted in rates going up by Rs 2.33 a litre. However, there is now a move to hike diesel rates by at least Re one a litre.

Deora may, however, bargain for an increase in LPG and kerosene rates although it would not be in the range of the steep Rs 100 per cylinder and Rs 6 a litre hike, respectively, suggested by the Kirit Parikh panel on fuel pricing reforms.