To check fuel adulteration and ensure poor get the benefit, the government intends to transfer the subsidy amount for kerosene directly to around 40 crore poor from April next year.
The fuel subsidy burden on the government in 2010-11 was Rs 38,336 crore in the last financial year of which about Rs 16,000 crore was meant for providing kerosene at subsidized rates to the poor. In this budget, the total petroleum subsidy is Rs 23,640 crore.
Till now, the government had to bear a cost of Rs 28 per litre to provide kerosene at highly subsidized rate of Rs 12 per litre. The low cost meant incentive to sell kerosene for adulteration of petrol, whose market price is Rs 63 per litre.
“As the product will move in the entire distribution chain at full price, there will be no incentive left for diversion of kerosene,” says a proposal mooted for Empowered Group of Ministers headed by Finance Minister of Pranab Mukerjee for direct cash transfer.
The government intends to introduce the new regime from April 2012 and sought EGoMs approval for the same. The petroleum ministry has also sought financial incentives for the states to set up an institutional mechanism to undertake transfer of cash subsidy before end of March 2012, the proposal says.
Once the new regime is introduced a below poverty line (BPL) family will get approximately Rs 300 per month on a smart card to be registered in name of a household woman. Kerosene will be available at the existing fair price shops and the poor will get it at the existing subsidized price after the money will be deducted from her smart card. The monthly quota ranges between 10-14 litres per family in different states.
The work for introducing the regime has already started in states such as Haryana and Andhra Pradesh, where smart cards have been introduced for availing subsidized goods from the fair price shops. “These smart cards will have Aadhaar numbers to prevent any leakages,” a senior government official said.
After kerosene, the government plans to introduce direct cash transfer of subsidy for food grains available under the public distribution system. A committee headed by plan panel deputy chairperson Montek Singh Ahluwalia has already submitted report recommending the mechanism for direct cash transfer to the poor, similar to the one for kerosene.
Two government committees —headed by C. Rangarajan in 2006 and by B.K. Chaturvedi Committee in 2008— had recommended that subsidised kerosene be supplied only to the poor families and it should be direct cash transfer.
As per government reports, over 40 percent of kerosene meant for poor is pilfered for either sale in open market or petrol adulteration, especially in Punjab, Maharashtra, Chhattisgarh and Uttar Pradesh.