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Business News/ News / India/  Subsidy on kerosene eliminated via small price hike, now priced at market rates
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Subsidy on kerosene eliminated via small price hike, now priced at market rates

The government has eliminated subsidy on poor man's fuel kerosene through small fortnightly price increases and the fuel sold through the public distribution system (PDS) is now priced at market rates

The move has the potential to end the illegal diversion of an estimated 40% of the subsidized kerosene allocated to states for adulteration of diesel. Photo: Ramesh Pathania/Mint Premium
The move has the potential to end the illegal diversion of an estimated 40% of the subsidized kerosene allocated to states for adulteration of diesel. Photo: Ramesh Pathania/Mint

NEW DELHI : The government has eliminated subsidy on poor man's fuel kerosene through small fortnightly price increases and the fuel sold through the public distribution system (PDS) is now priced at market rates.

The Union Budget for 2021-22 makes no provision for payment of subsidy on kerosene in the fiscal year beginning April, according to budget documents tabled in Parliament.

In the current fiscal ending March 31, the kerosene subsidy was 2,677.32 crore, down from 4,058 crore in the previous financial year, the documents showed.

Industry sources said the government in 2016 allowed state-owned fuel retailers to raise the price of kerosene by 25 paise a litre every fortnight to cut the subsidy burden.

The subsidy was eliminated by February last year. In all prices were hiked by 23.8 per litre in under four years - From 15.02 a litre in Mumbai to 36.12 a litre.

Subsequent to that, the PDS rates have revised monthly in tandem with the benchmark international oil prices, they said.

So the rates in May 2020 fell to 13.96 a litre but have more than doubled since then to 30.12 a litre. In the last price increase in January, rates went up by 3.87 a litre.

The price hikes have almost gone unnoticed and barely evoked any comments from the opposition, which has only voiced concern over rise in petrol and diesel prices.

Kerosene is used by ration card holders for cooking and lighting purposes. But its consumption has dropped with 8 crore free LPG connections being provided to poor households.

Kerosene consumption showed a de-growth of 28.4% in April-December 2020, according to the Oil Ministry's Petroleum Planning and Analysis Cell (PPAC).

States of Andhra Pradesh, Delhi, Haryana and Punjab have been declared kerosene free while Gujarat, Bihar, Uttar Pradesh and Maharashtra have voluntarily surrendered a certain quantity of PDS kerosene allocation, according to PPAC.

While petrol price was deregulated in June 2010, diesel rates were freed in October 2014. This meant end of subsidy on the two fuels.

Subsidy continued only on cooking gas (LPG) and kerosene.

On LPG, the budget has provided for a subsidy of 12,480 crore in 2021-22, down from 25,520.79 crore in the current fiscal and 35,605 crore in the previous year.

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Published: 02 Feb 2021, 05:15 PM IST
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