9 states, 2 UTs agree to implement transfer of kerosene subsidy

Centre expects to roll the scheme within six to eight months

In a much-needed fillip to the government’s Direct Benefits Transfer (DBT) scheme, nine states and two Union Territories (UTs) have agreed to implement the mechanism for transfer of kerosene subsidy. The Centre expects to roll this out within eight months.

“Nine states and two UTs have agreed to be part of the direct cash transfer of kerosene subsidy. Our pilot project on this was a huge success,” said Petroleum & Natural Gas Minister M Veerappa Moily.

The Centre plans to launch the scheme for transfer of subsidy on domestic LPG and kerosene sold through the Public Distribution System (PDS) by 2013-14. While LPG is sold by dealers of oil marketing companies to consumers directly, kerosene is retailed through a large network of PDS shops managed by state governments. Following dissenting voices on the mechanism, the government had kept it voluntary for states to implement the system.

“We are looking to implement DBT in the states (that have agreed) within six to eight months,” a senior petroleum ministry official said, without divulging further details. The total underrecovery on kerosene sale during the April-December period this financial year was Rs 21,891 crore. The subsidy burden on sale of a litre of the fuel under PDS currently stands at Rs 33.43. According to reports, the direct transfer of subsidy on LPG and kerosene would help the government save Rs 15,000 crore.

Experts believe it will not be easy to implement DBT for kerosene subsidy transfer. “The Alwar pilot project had its flaws. While at least half the users were not able to open bank accounts, some others received no benefits at all. There also were clauses, such as subsidy for subsequent three months would be transferred only after one has used three-month subsidy already transferred to a bank account,” said Reetika Khera, an economist and a PDS system expert. She added DBT was being used only for scholarships and pension schemes in the 43 districts where it had been implemented.

However, a ministry official said that its pilot project for kerosene at Kotkasim block in Alwar district of Rajasthan was a huge success, as they were able to plug 80 per cent of leakage in PDS by blocking fake users.

Khera adds that in the 43 districts that the direct cash transfer system is implemented, it is being used for scholarships and pension schemes only.

“For example, only 1,000 of the total 16,000 beneficiaries were paid in January,” she said.

BEYOND PILOTS

• A successful model:
  The govt claims its pilot project was a huge success in Kotkasim block of Rajasthan’s Alwar district, where 80% of leakage in the public distribution system was plugged
• States/UTs on board:
  

Five Congress-ruled ones — Rajasthan, Maharashtra, Himachal Pradesh, Kerala and Andhra Pradesh; and six under other parties’ rule — Madhya Pradesh, Sikkim, Jharkhand, Andaman & Nicobar, Pondicherry and Goa