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Narendra Modi government offers cash to states to get rid of kerosene subsidy

Every state decides on the amount of subsidised kerosene it needs and and accordingly seeks allocation from the Centre.

Given the lukewarm response to the pilot projects for direct benefit transfer of kerosene subsidy (DBTK), the Centre has decided to go slow on the plan and instead focus on giving cash incentives to the states that voluntarily agree to cut their PDS kerosene quotas. Official sources said that three states — Karnataka, Telangana and Haryana — have already settled for lower PDS kerosene allocations and received cash incentives from the Centre. Several others, including Gujarat, Punjab, Madhya Pradesh and Nagaland, have cut down on their PDS kerosene demand.

Every state decides on the amount of subsidised kerosene it needs and and accordingly seeks allocation from the Centre. “The infrastructure required to capture biometrics for identification of beneficiaries and collect bank account data is a big task. States were reluctant to implement the DBT scheme for kerosene subsidy. Now even the ministry of petroleum and natural gas also realises that DBTK requires too much effort,” said a government official, who did not want to be named.  What has enabled the states to seek less kerosene is a drastic decrease in the demand for the fuel from the below-poverty-line ration card holders thanks to the LPG connections under the Pradhan Mantri Ujjwala Yojana (PMUY) launched in May last year. About 75% of the country’s households had LPG connections by the end of 2016-17 against 56% at the start of 2014-15; allocation of PDS kerosene fell by a fifth to 6.93 million kilolitres in 2016-17 from the previous year. While the LPG subsidy bill came down from Rs 36,580 crore in 2014-15 to Rs 19,802 crore in 2016-17 and the budgeted Rs 16,076 crore in 2017-18, kerosene subsidy bills have remained roughly at the same levels in recent years (see chart).

 

 

The DBTK pilot, being implemented in 11 districts in Jharkhand, wherein customers buy kerosene at the unsubsidised rate and the subsidy amount is transferred to beneficiaries’ bank accounts. The state provides 3 litres of kerosene to eligible ration card holder per month. However, given that the subsidy amount is around Rs 9 per litre, the total amount to be transferred per household is just Rs 27 per month. It is being realised that the DBTK might not be an economical proposition given the infrastructure and administrative costs.

On January 1, 2016, the central government in a release had said eight states — Chhattisgarh, Haryana, Himachal Pradesh, Jharkhand, Madhya Pradesh, Maharashtra, Punjab and Rajasthan — had come forward to implement DBTK across their various districts. However, only Jharkhand has implemented the system. The government earmarked Rs 50 crore for DBTK in 2016-17, after making a token provision of Rs 1 crore the previous year. However, sources said, more states need to come forward to take voluntary cuts in kerosene allocations. It is a politically sensitive issue and hence many states are still wary. The cash incentives for taking voluntary cuts in allocations is calculated taking 90% of the 2015-16 allocation as the baseline.

According to the official cited above, concerns remain as many states, despite having a high number of households with access to electricity and cooking gas, continue to seek high kerosene allocations. However, states such as Karnataka, Gujarat, Madhya Pradesh, Andhra Pradesh, Telangana, Rajasthan, Haryana and Punjab have already removed PMUY beneficiaries from the list of kerosene subsidy beneficiaries. http://www.financialexpress.com/economy/narendra-modi-government-offers-cash-to-states-to-get-rid-of-kerosene-subsidy/705033/

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Comment (1)

  1. K SHESHU BABU

    The government pilot projects like Direct Benefit Transfers are proving not successful due to many loopholes. The states should tighten their public distribution system

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