Direct Benefit Transfer scheme brought into kerosene subsidy

The government on Friday introduced the Direct Benefit Transfer (DBT) scheme of cash transfer of subsidy in kerosene distribution to cut down diversion and black marketing of the fuel.

"Eight states have agreed to the introduction of DBT of subsidy for kerosene in 26 districts," a union petroleum ministry release here said.

The states that have agreed to implement the scheme from 1 April are Chhattisgarh, Haryana, Himachal Pradesh, Jharkhand, Madhya Pradesh, Maharashtra, Punjab and Rajasthan.

The Centre has allocated 86.85 lakh kilolitres of subsidised public distribution system (PDS) kerosene to states in the current financial year, while the country's total annual consumption stands at 71.3 lakh kilolitres.

"The allocation is higher than the total household kerosene demand in the country. Thus there is evidence some part of the kerosene allocation is diverted for non-eligible purposes," the statement said.

"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," it added.

To incentivise states to implement DBT in kerosene, they will be given cash incentive of 75 percent of subsidy savings during the first two years, 50 percent in the third year and 25 percent in the fourth year.

The government had launched the DBT in LPG across the nation from January 1, 2015 that has emerged as the largest direct benefit transfer scheme in the world.

Describing the DBT scheme as a "game changer" for India, Chief Economic Advisor Arvind Subramanian had, however, earlier this year urged caution in extending the LPG model to kerosene, which does not have a supporting supply chain in the form of state-run oil marketing companies.