`The timing is appropriate to discuss issues like taking out above poverty line cardholders from the purview of subsidised kerosene and controlling leakage'

Richa Mishra

New Delhi, Dec. 2

WITH international crude prices continuing to remain at high levels and domestic oil marketing companies reporting huge under recoveries because of subsidised kerosene and LPG sales, the Petroleum Ministry has activated the process to decide whether dual pricing for subsidised kerosene could be worked out to target focussed user groups.

According to a senior Petroleum Ministry official, "The timing is appropriate to discuss issues like taking out above poverty line (APL) cardholders from the purview of subsidised kerosene and controlling the leakage, which would help in bringing down the subsidy bill substantially."

The official said the Government needs to take a view on whether kerosene sold under the public distribution system (PDS) should cover APL consumer and if not, what should be the arrangement for APL. Another issue for consideration is whether there should be one price or dual price, the official said, adding that the Government would also be considering how to make kerosene available for non-domestic purpose, as the extent of diversion was high.

Armed with the report of the National Council of Applied Economic Research (NCAER) on assessing the genuine demand and requirement of kerosene, the Petroleum Ministry has called a meeting of State Chief Secretaries and Heads of Food and Consumer Affairs Department on December 9. About 20 States and major Union Territories such as Delhi have been invited.

Asked whether the meeting would only deliberate on kerosene, the official said that cooking gas (liquefied petroleum gas) would also be discussed, though the issues are different.

The Ministry has also invited the oil companies for the meeting.

With a view to assessing the genuine demand and requirement of kerosene, the Government had commissioned a comprehensive study through the National Council of Applied Economic Research (NCAER) in December 2004. The report was submitted in October this year.

In one of their recommendations, NCAER has said that taking out APL cardholders from the purview of subsidised PDS kerosene would amount to 41.2 per cent savings of the current subsidy on this commodity.

If leakage was controlled, this savings could give enough scope to the Government to keep subsidised kerosene price for BPL (below poverty line) families at lower levels.

In fact, at the recent meeting of Consultative Committee of Parliament on `LPG and Kerosene - Problems and Subject', the Petroleum Ministry had informed the members that it had written to the State Governments asking for their views on the matter.

As per the Government decision, subsidy on PDS kerosene and domestic LPG is to be phased out by March 31, 2007.

(This article was published in the Business Line print edition dated December 3, 2005)
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