Finance Ministry To Fund Only 52% Of Kerosene Subsidy

The finance ministry has provided for only 52 per cent of the subsidy on kerosene to be sold through the public distribution system (PDS), and domestic liquefied petroleum gas (LPG) required during the current fiscal. The balance amount will have to be raised through supplementary demand for grants.

Against the budgetary allocation for subsidy on PDS kerosene and domestic LPG of Rs 4,495.80 crore during 2002-03, the estimated requirement was about Rs 8,535 crore, petroleum ministry said.

In November 1997, the government had decided to reduce the subsidy on domestic LPG and PDS kerosene to 15 per cent and 33.33 per cent of import parity, respectively, by March 31, 2002, and that the subsidy would be borne by the fiscal budget after the dismantling of administered pricing mechanism (APM) in the petroleum sector from April 1, 2002.

It was later decided that the subsidy on domestic LPG and PDS kerosene would be provided on a specified flat rate basis from the Consolidated Fund from April 1, 2002. The subsidies would be phased out in three to five years.

The government realised that after adjusting the flat rate of subsidy, the retail prices of PDS kerosene and domestic LPG would vary as the prices of crude oil change in the international market.

Petroleum ministry sources say though with a 25 per cent increase in the international prices of crude oil in the past two months, an increase in the PDS kerosene and domestic LPG prices was due, it has not been effected because the scheme for administering this subsidy is not yet finalised by the finance ministry.

The current estimated weighted average subsidy on domestic LPG and PDS kerosene is around Rs 90 per cylinder and Rs 3 a litre, respectively.