Mumbai: The government has asked public sector oil companies to desist from opening new retail outlets, at least for the next two years, in order to cut costs for companies which are losing heavily from selling fuel at heavily subsidised prices,  petroleum ministry sources said.

While the government has barred construction of new outlets, it said only those new stations in an advanced state of construction should be completed.

State-run oil companies like Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are losing crores of rupees daily by selling fuel at heavily discounted prices, set by the government, to help the poor and protect itself from rising inflation.

The government and upstream companies like the Oil and Natural Gas Corporation meet part of the subsidy cost of the downstream retailers.

PSU oil companies had expanded their retail network in order to compete with private firms like Reliance Industries and Essar Oil, but the latter have since moved out of the retail business as they found it difficult at sharply higher prices.

The government raised the prices of petrol and diesel and by about 10 per cent, but the hike fell far short for crude oil prices that have more than doubled over the past one year.

Crude oil prices soared to $147 a barrel on Friday.

Upstream companies and the government partly subsidise their losses, adding to the strain on public finances.