With finance minister P Chidambaram's meeting with oil minister Murli Deora ending in a deadlock on Tuesday, the top political leadership will now have to decide how to save the state-owned oil marketing companies from bankruptcy while cushioning consumers against a fresh burden in an electorally crucial season.

The issue has not been discussed with the UPA leadership. Senior coalition sources, however, conceded that, given the worsening bottom lines of oil marketing companies, a decision could no longer be avoided. They said that the leadership might take a call in the next four-five days, indicating that no scheme which could inconvenience the consumer -- already reeling under high cost of living -- could pass political muster.

The issue, always sensitive, has taken on a new dimension after Congress's loss in the Karnataka polls. With elections due in Delhi, Rajasthan, Chhattisgarh and Madhya Pradesh around October, UPA is caught in a cleft stick. Any substantial increase in fuel prices in one go is bound to evoke negative reaction from the electorate and give the opposition a stick to beat UPA with in the polls.

Besides, a major increase in diesel prices will push the cost of living further up as it is the main fuel used by the the transport sector. Ironically, a cess on income and corporate taxes too has the potential for a similar outcome.