In probably the last pre-poll bonanza, the government may cut diesel price by Rs 2 a litre in a "day-or-two" but there would be no reduction in petrol prices.
Government wants to announce the price reduction, on top of the Rs 4 a litre cut in two installments since December, before General Elections are announced, an official said.
"The Cabinet may meet in a day-or-two to decide on the reduction," he said. "Most likely, the Cabinet may meet tomorrow."
A reduction in diesel price would pull down inflation and make goods transportation, especially fruits and vegetables, cheaper.
However, there would no reduction in petrol rates, which in two installments had already been slashed by Rs 10 a litre.
State-owned fuel retailers Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum are selling petrol at almost break-even point while they make Rs 3.26 a litre profit on diesel sales.
"There is a scope for reduction in diesel rates only," the official said. On petrol, the margins are just Rs 0.08 per litre.
The three firms are currently making Rs 36 crore per day profit on diesel sales, enough to negate the Rs 24 crore per day loss on kerosene and Rs 9 crore on domestic LPG.
Kerosene is being sold at a loss of Rs 11.70 per litre and LPG at Rs 77.51 per 14.2-kg cylinder.