Kerosene racket is half the size of NREGA bill

The poor man’s fuel, kerosene — paid for by state subsidy — is diverted to adulterating diesel mostly for truckers. And the industry is estimated to be worth half the sum the government spends on employment for the rural poor every year.
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Updated on Jan 29, 2011 12:42 AM IST
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Hindustan Times | ByAnupama Airy, New Delhi

The poor man’s fuel, kerosene — paid for by state subsidy — is diverted to adulterating diesel mostly for truckers. And the industry is estimated to be worth half the sum the government spends on employment for the rural poor every year.

Welcome to the Great Indian Kerosene Racket, which hit a new high this week when additional collector Yashwant Sonawane of Maharashtra’s Nashik district lost his life in a gruesome attack by pilferers he caught red-handed.

Sonawane was trying to stop diversion of subsidised kerosene sold to the poor through the public distribution scheme.

Oil industry experts say this illegal industry is worth more than `20,000 crore, half the amount the state spends under the National Rural Employment Guarantee Act (NREGA).

Kerosene is an easy adulterant because it costs `12.37 a litre — after the government pays a `20-a-litre subsidy — while diesel is priced at `37.75 a litre and petrol at `58.37 a litre.

“An estimated 40 to 50 per cent of the 10 million tonne of kerosene that the government annually allocates to states is diverted once it leaves the oil company depots,” said an oil company official.

That translates into an illegal industry worth `21,000 crore, based on the black market price of `31 per litre of kerosene. Petroleum minister Jaipal Reddy has announced a three-pronged strategy to fight the mafia.

This includes reintroduction of a chemical marker system in kerosene; a GPS (global positioning system)-based tracking device to follow the movement of trucks from oil depots to fair price ration shops and internet-based online updates on the quantity of fuel and time of departure of trucks.

A study by the Indian Institute of Management, Ahemdabad for Petrofed, the apex oil industry body, found out that kerosene meant to aid the poor simply does not reach them.

The study suggested evidence that about 40 per cent of kerosene was being siphoned out. But that was in 2006. Government officials now put the figure at 50 per cent.

“Lower prices for kerosene create options for diversion of kerosene meant for the subsidised segments to other uses. Besides hotels and restaurants, low priced kerosene meant for cooking and lighting application in households could be diverted to industrial uses and for generating electricity through portable gensets,” the IIM study said.

“Adulteration of other fuels especially diesel is another possibility,” it added.

Cheap fuels are a dubious business. In 2000, the Central Bureau of Investigation (CBI) arrested Ramar Pillai, who created a sensation with what he called a ‘herbal fuel’ he had invented, on charges of cheating the public by selling industrial organic chemicals as herbal fuel.

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