Govt announces Direct Benefit Transfer scheme for kerosene subsidy

Scheme to be rolled out in 26 districts across eight states from 1st April

The government today announced the launch of Direct Benefit Transfer (DBT) for kerosene subsidy in a bid to cut down the diversion and black marketing of the fuel.

The new scheme will be rolled out in 26 districts across eight states from 1 April including Chhattisgarh, Haryana, Himachal Pradesh, Jharkhand, Madhya Pradesh, Maharashtra, Punjab and Rajasthan.

The centre has allocated 86.85 lakh kilolitres of subsidised PDS kerosene to states in the current financial year even as total annual consumption stands at 71.3 lakh kilolitres. "The allocation is higherthan the total household kerosene demand in the country. Thus there is evidence some part of the kerosene allocation is diverted for non-eligible purposes," said an official statement.

It added the demand for kerosene for both lighting and cooking purposes has come down through improved implementation of the village electrification programme and the rise in LPG connections for the below-poverty-line households.

"The success of the PAHAL scheme in cooking gas gives an indication of the potential for use of DBT to ensure that genuine beneficiaries get the benefit of subsidy while preventing illicit diversion. Subsidy outgo for kerosene for the financial year 2014-15 was about Rs. 24,799 crore," the statement said.

While several state governments have come forward to implement DBT in kerosene in selected districts, the eight states mentioned above had agreed to introduce the direct cash transfer.

Where such transfer is introduced, the consumer will pay the un-subsidised price of kerosene at the time of purchase.  Subsequently, the amount of subsidy will be directly transferred to the bank account of the beneficiary.  To avoid any inconvenience to the beneficiary through payment of un-subsidised price, subsidy will be credited to eligible beneficiaries in advance during the initial purchase.

In order to incentivise states to implement DBT in kerosene, they will be given cash incentive of 75% of subsidy savings during the first two years, 50% in the third year and 25% in the fourth year. In case some states voluntarily agree to undertake cuts in kerosene allocation beyond the savings due to DBT, a similar incentive will be given to them. The calculation will be based on net savings in kerosene consumption at state level.

The government also clarified it has advised states to take all necessary steps to ensure that eligible and genuine beneficiaries particularly in rural areas are able to access their full entitlement of kerosene and special care should also be taken in areas having irregular power supply.

The centre will further consult the sate governments Governments before operationalising the scheme which will be reviewed after three months of implementation.

Thegovernment had launched a similar DBT in LPG across the nation from January 2015 under which subsidy is,directly transferred into the bank accounts of beneficiaries. The centre saved around Rs 14,000 crore last fiscal due to weeding out of the fake and,duplicate LPG connections through DBTL.