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Kerosene, LPG subsidies to stay

business Updated: Jan 25, 2010 01:15 IST
Anupama Airy

Realising the adverse political fallout of any tinkering with consumer prices of cooking gas (liquefied petroleum gas, or LPG) and kerosene, the government is planning to extend its subsidy scheme on the two fuels by another five years to March 31, 2015.

The current scheme, where government provides Rs 22.58 per LPG cylinder and Rs 0.82 per litre of kerosene as flat subsidy, expires on March 31, 2010.

“Discussions have been held with the finance ministry and an announcement to extend the subsidy scheme beyond March 31 for another five years is expected in the Budget for 2010-11,” a senior petroleum ministry official told HT.

In the 2009-10 budget, the government had made an allocation of Rs 2,840 crore as subsidy on the two fuels. But the real subsidies to consumers are even higher — Rs 15.05 per litre on kerosene and Rs 167.63 per cylinder on LPG. After the budgetary compensation, there is still an unmet amount of Rs 14.23 per litre for kerosene and Rs 145.05 per LPG cylinder.

These are known as “under-recoveries” whose burden falls on state-owned fuel retailers (Hindustan Petroleum, Indian Oil and Bharat Petroleum). The under-recoveries on these two counts could cross Rs 31,000 crore in for 2009-10.

While the government recently announced that Rs 12,000 crore of this burden would be met by way of a cash subsidy, there is no clarity on the unmet portion of Rs 19,160 crore.