India Eliminates Subsidy On Kerosene Via Small Price Hikes
A shopkeeper measures kerosene at a retail outlet in Mumbai.(Photographer: Prashanth Vishwanathan/Bloomberg News)

India Eliminates Subsidy On Kerosene Via Small Price Hikes

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The government has eliminated subsidy on kerosene through small fortnightly price increases and the fuel sold through the public distribution system is now priced at market rates.

The Union Budget for 2021-22 makes no provision for payment of subsidy on kerosene in the fiscal year beginning April, according to budget documents tabled in Parliament.

In the current fiscal ending March 31, the kerosene subsidy was Rs 2,677.32 crore, down from Rs 4,058 crore in the previous financial year, the documents showed.

Industry sources said the government in 2016 allowed state-owned fuel retailers to raise the price of kerosene by 25 paise a litre every fortnight to cut the subsidy burden.

The subsidy was eliminated by February last year. In all prices were hiked by Rs 23.8 per litre in under four years - From Rs 15.02 a litre in Mumbai to Rs 36.12 a litre.

Subsequent to that, the PDS rates have revised monthly in tandem with the benchmark international oil prices, they said.

So the rates in May 2020 fell to Rs 13.96 a litre but have more than doubled since then to Rs 30.12 a litre. In the last price increase in January, rates went up by Rs 3.87 a litre.

The price hikes have almost gone unnoticed and barely evoked any comments from the opposition, which has only voiced concern over rise in petrol and diesel prices.

Kerosene is used by ration card holders for cooking and lighting purposes. But its consumption has dropped with 8 crore free LPG connections being provided to poor households.

Kerosene consumption showed a de-growth of 28.4% in April-December 2020, according to the Oil Ministry's Petroleum Planning and Analysis Cell.

States of Andhra Pradesh, Delhi, Haryana and Punjab have been declared kerosene free while Gujarat, Bihar, Uttar Pradesh and Maharashtra have voluntarily surrendered a certain quantity of PDS kerosene allocation, according to PPAC.

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While petrol price was deregulated in June 2010, diesel rates were freed in October 2014. This meant end of subsidy on the two fuels.

Subsidy continued only on cooking gas and kerosene.

On LPG, the budget has provided for a subsidy of Rs 12,480 crore in 2021-22, down from Rs 25,520.79 crore in the current fiscal and Rs 35,605 crore in the previous year.

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