Centre may apply the brakes on direct benefit transfer for kerosene

Direct transfer of cash susbidy for kerosene is likely to end if the current thinking within the government is an indicator. The thinking is gaining ground with the government tasting success in two flagship schemes — rural electrification and LPG connections to below poverty line households — that could be used to substitute kerosene.

“These two schemes —rural electrification and LPG connections to BPL households — will eventually replace the use of kerosene for lighting and cooking purposes. So the need for direct benefit transfer of kerosene subsidy can be re-evaluated,” said an official familiar with the development.

A discussion to this effect has already started between the Ministries of Petroleum and Finance. But, it may take time as a number of States are rolling out cash transfers for kerosene, following the government announcement that DBT for the fuel would start in 39 districts in 2016-17.

“As the use of electricity and LPG cylinders become more prevalent, the demand for subsidised kerosene will come down. For other special categories such as fisherman, initiatives such as kerosene sachets can be introduced,” officials pointed out.

The government plans to provide round-the-clock power supply to rural areas through the Deen Dayal Upadhyay Gramin Vidyutikaran Yojana. According to government data, of the 5.97 lakh villages, 98.7 per cent have been electrified under the scheme, as on September 19.

Similarly, the Pradhan Mantri Ujjwala Yojana, which was launched in May this year, aims to reach out to provide five crore cooking gas connections to women from below poverty line families in order to replace unclean cooking fuels. Over 60 lakh such connections have already been given out.

States are also being incentivised to reduce their allocation for subsidised kerosene. Karnataka has already announced a reduction in its PDS kerosene quota to 90,000 kilolitre (kl) against its allocated 5.09 lakh kl and will in turn get ₹70 crore as incentive from the Centre.

Simultaneously, States such as Delhi and Chandigarh have completely wiped out the use of the fuel, while Haryana targets to become kerosene-free by March 2017.

Government data indicates that the demand for PDS kerosene has been waning in the past few years. As against an allocation of 86.85 lakh kl of subsidised kerosene to the States, only 85.36 lakh kl was lifted in 2015-16. In contrast, in 2014-15, States were given 89.75 lakh kl of PDS kerosene, of which 88.78 lakh kl was lifted.

To help cut down a part of the ₹7,144 crore kerosene subsidy bill for the fiscal, oil marketing companies have also been permitted to raise the retail price of PDS kerosene by 25 paise per month for 10 months.

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