Just when the government is plucking up courage to free prices in the oil economy and instead ringfence those under the poverty line with subsidised coupons to buy from the markets, the reported plan of the Sonia Gandhi-led NAC to widen the national food security programme to provide kerosene and edible oil will complicate matters. The government has the backing of the Kirit Parikh-led panel to buttress its arguments. But if the NAC, with its political clout, strikes a discordant note, it will be difficult to sideline. Yet, as we have argued earlier, continuing kerosene subsidies and adding cooking gas to the public distribution system further incentivise diversion to the grey market. Instead, the NAC should look at ways and means of targeting access to kerosene by people below the poverty line more efficiently. It should focus on liberalising fuel prices, which would help to remove the artificial price differential between subsidised and non-subsidised fuels. According to a study by the NCAER that was commissioned by the petroleum and natural gas ministry, 39% of PDS kerosene is diverted by black marketers, and of the total volume diverted, 18% is used to adulterate diesel. This diversion deprives needy families of the basic commodity and the NAC?s reported proposal will further negate the Parikh committee recommendations for rationality in the pricing of PDS kerosene, on which oil companies incur huge under-recoveries?around Rs 28,225 crore in 2008-09. Steps must be taken to rationalise allocation of kerosene to the states. At the same time, stricter measures must be undertaken to curb the menace of adulteration across the country.
With increase in electrification, consumption of kerosene for lighting purposes in rural areas has fallen. Using data from NSSO, the BK Chaturvedi committee found rural use of kerosene for lighting has fallen to 42% in 2005-06 from 51% in 1990-2000, and only 1% use it for cooking purposes. The report recommended that households below the poverty line be provided with one solar lantern, which would roughly amount to two-thirds of the total subsidy element of supplying PDS kerosene. Despite the increase in access to electricity in villages, as the Chaturvedi committee underlined, 24% of rural kerosene consumption goes to states that have achieved 100% electrification and do not need kerosene for lighting. Such misuse of the fuel must be checked and it must be ensured that the subsidised fuel reaches the intended beneficiaries. Better targeting of subsidies can be achieved by introducing coupons that could be given to those below the poverty line, who could then use them at any shop to buy kerosene. This will reduce the government?s hassle to monitor PDS shops. Alternatively, tamper-proof smart cards could be introduced that can help the government in better monitoring the distribution of PDS kerosene.
