The government could raise petrol and diesel prices as it looks for ways to tackle the widening revenue deficit amidst a rise in international crude oil prices, union petroleum minister Murli Deora said today.

Deora, who met finance minister Pranab Mukherjee to demand restoration of tax breaks for natural gas production, also discussed dereguation of fuel prices with him.

"We appealed to him that the seven-year tax holiday from payment of income tax should also apply to natural gas as is the case with crude oil production," he said after the meeting.

"We are seriously concerned about the rise in crude oil prices," Deora said, adding, "The alternatives before us are raising petrol and diesel prices, asking the government to make up for revenue loss through issuing oil bonds and upstream firms chipping in."

"It could even be all of the three as had been the practice till now," he added.

Deregulating fuel prices has been on the cards since crude oil prices plummeted from the 2008 highs, falling by $100 a barrel to around $47 a barrel, lat month. But, with oil price climbing back to above $70 a barrel levels, the government is unlikely to fully deregulate fuel prices.

Deora, however, was not categorical on government hiking fuel prices, when he said: "I cannot say that."

State-run fuel retailers Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum together stands to lose around Rs60,000 crore in revenues if they are to sell petrol, diesel, domestic LPG and kerosene at current crude prices.

PSU fuel retailers had reported small profits following the fall in crude oil prices to below $50 a barrel-levels.

It is likely that fuel prices rise a bit as the government tries to limit the revenue loss by dividing the cost among consumers, oil companies and itself by way of a small price increase, oil bonds and upstream assistance.

Although Deora hinted at tying a fuel price decision with the union budget proposals, he refused to give a time-frame for deciding on the issue.