LPG-like cash transfer for kerosene soon

The Modi government is now targeting leakage in kerosene subsidy. After LPG, the Centre is now going to launch direct benefit transfer (DBT) of subsidy in kerosene from April 1, 2016 to ensure that genuine beneficiaries get the benefit while preventing illicit diversion.

Eight state governments, including Chhattisgarh, Maharashtra, Madhya Pradesh and Punjab, till now have come forward to implement DBT in kerosene in selected districts. To encourage states to launch DBT of subsidy in kerosene, the Centre on Friday announced that states will be given 75 per cent subsidy savings in first two years in cash. It will get reduced to 50 in the third year and 25 per cent in the fourth year.

In case, the states voluntarily agree to undertake cuts in kerosene allocation, beyond the savings due to DBT, a similar incentive will be given to those states and Union Territories.

The Centre said that in states where DBT for kerosene is launched, the consumer will pay the un-subsidised price for it at the time of purchase. Subsequently, the amount of subsidy will be directly transferred to the bank account of the beneficiary. To avoid any inconvenience to the beneficiary through payment of un-subsidised price, subsidy will be credited to eligible beneficiaries in advance during the initial purchase.

The government has decontrolled petrol and diesel prices. It has already launched DBT in LPG and scrapped LPG subsidy for those with annual taxable income of `10 lakh. Kerosene was the only fuel till date in which no reform has been implemented.

Subsidised kerosene is misused to adulterate other fuels and it has resulted in kerosene mafia in many states, including Maharashtra. Subsidy outgo for kerosene for the financial year 2014-15 was about around Rs 25,000 crore. For January 2016, under-recovery on kerosene was Rs 9.16 per litre. The government said increase in coverage of power supply through electrification of villages and increase in new LPG connection to poor has reduced demand for kerosene.

National Sample Survey 2011-12 indicated that the total consumption of kerosene in the country, including both open market and PDS kerosene, was 71 lakh kilolitres. Even though consumption of kerosene has been coming down over the years, 86.85 lakh kilolitres of subsidised PDS kerosene has been allocated to the states in the year 2015-16, which is higher than the total household kerosene demand in the country.