The current subsidy of about 60 per cent on kerosene will come down over time, as it stands to cause distortions in the economy, Chief Economic Advisor Kaushik Basu said.
“Kerosene (price) is fixed, but it’s not fixed into eternity... I do believe that by having this controlled price for LPG and kerosene, the distortions will continue,” he said.
Yesterday, while revising fuel prices, the government raised the price of kerosene by Rs 3 a litre. In Delhi, it is now available at Rs 12.32 a litre under the public distribution system (PDS). However, the subsidy on a litre of kerosene still stands at Rs 17.92.
“Kerosene will also be adjusted, but it’s not an automatic float (unlike petrol and diesel),” Basu said, hinting at further increases in the price of the common man’s cooking medium.
For now, the government had gone easy and done a balancing act between pure hard economic logic and the fact that kerosene was mostly consumed by the poorer sections of the society, he said.
Further, he said kerosene was being smuggled from India into neighbouring countries like Pakistan, Sri Lanka, Nepal and Bangladesh — where its prices were at least double.
“There is ample evidence that this cheap, subsidised kerosene is simply going across the border. So, it’s not only goods... but also the government’s subsidy that is going across the border,” he said.
He said instead of increasing vigilance, the government could disincentivise the act by raising prices.
“The efficient way to cut it off is by bringing down this price differential, and a small move has been made towards that,” Basu added, citing the price increase of Rs 3 a litre.
The advisor was also of the opinion that raising the price of kerosene would deter anti-social elements from adulterating diesel with the cheaper fuel.
“You can still adulterate, but now you have to pay a bit more for adulterating. Hopefully, that’s going to be a disincentive,” he said.
