After the dismantling of the administered pricing mechanism (APM) in the petroleum sector on April 1, kerosene subsidy may be available only to the families living below the poverty line (BPL). At present, kerosene sold through the entire public distribution system enjoys this subsidy.

While the "target group" for kerosene has been identified by the finance ministry as the one living below the poverty line, for domestic LPG, it has proposed to restrict the supply to one cylinder per family per month.

Though, the petroleum ministry has opposed the proposal of restricting the LPG sale, it has no objection to giving kerosene subsidy only to the poorest of the poor.

It is proposed that the number of families living below the poverty line in each state and the Union Territory for the purpose of giving kerosene subsidy will be provided by the department of food and public distribution.

The monthly allocation for each family will be decided by the petroleum ministry in consultation with the finance ministry and the food and public distribution department. Whereas, the fate of the LPG proposal is still not known.

It is also proposed that the ex-depot issue price of kerosene will be fixed by the oil ministry in consultation with the finance ministry and this price will remain fixed for a period of six months or one year.

To reduce the financial burden on the budget on account of this subsidy, the government may consider fixing a relatively lower excise duty on kerosene. The duty concession may be announced in the Union budget tomorrow.

The government has worked out that the annual subsidy on kerosene and the domestic LPG, at the existing retail price and at an average international crude price of $25-a-barrel, comes to Rs 6,370 crore and Rs 6,450 crore, respectively.

In case the subsidy on kerosene is reduced to 33.33 per cent and on domestic LPG to 15 per cent of the import parity, the subsidy will come to Rs 4,820 crore and Rs 2,390 crore, respectively.