Compared to LPG, kerosene is not a clean fuel for cooking. It is a dirty fuel and causes indoor air pollution that has negative health effects, especially for women and children. for cooking food and cleaning utensils due to soot buildup. Greater access to clean cooking fuel for the urban poor would not only improve their quality of life but also reduce the government’s burden of cooking fuel subsidies.
It is important that the poor intended beneficiaries enjoy the benefits of LPG, which is a comparatively modern and clean cooking fuel. It is therefore imperative that systems are explored that encourage the switch from highly polluting cooking fuels to cleaner and more modern fuels such as LPG/PNG.
Delhi was earlier getting about 53,000 Kilolitre of kerosene oil every year from the Centre, which was issued to eligible households at a subsidised rate. At the present market rate of the oil, it would have cost the government about Rs 200 crores per year as a subsidy.
The scheme was launched in 2012 in partnership with three oil trading companies and the Union Ministry of Oil and Gas at a cost of Rs 62 crores to the Government of Delhi.
As part of the program, free gas hookups along with filled LPG cylinders, a two-burner gas stove, a regulator and a Suraksha whistle were distributed to Jhuggi Ration Card (JRC) holders below the poverty line (BPL) and Antodaya Ann Yojana (AAY) forgiven that they used kerosene oil for cooking.
A total of 3.56 lakhs of such ration cardholders were able to benefit from the scheme but families who already had an LPG hookup were not eligible. The department received 214,149 applications for free gas connections under the program, of which 20,732 were rejected.
This step would help to preserve the environment as no toxic gases would be released when the oil was burned, the gasoline would be less likely to be adulterated, air pollution would be positively affected, and the quality of life of people benefiting from the program would be improved, plus minor fire accidents and burn injuries.
In India, the government-subsidized four petroleum products, namely gasoline, diesel, kerosene and LPG, to protect domestic consumers, especially the poor, from the vagaries of international markets and improve access to energy. The subsidy was removed for petrol in September 2011 and for diesel in October 2014. However, kerosene and domestic LPG (sold to customers of public companies such as IOCL, HPCL and BPCL) are subsidized and continue to be sold at a price less than procurement costs. This leads to “insufficient returns” for the Oil Trading Companies (OMCs). Any shortfalls in yield are not borne by the OMCs, some are offset by additional government cash assistance, while some are covered by financial assistance from upstream National Oil Companies (NOCs) such as ONGCs.
The total kerosene subsidy has multiplied in the last decade; although the part of the central government subsidy payment remains fixed at Rs 82 per litre from 2004-05. The remaining part of the subsidy from 2004-05 will be borne by the public oil companies. Similar subsidy burden-sharing arrangements are also in place for LPG, where the part of the subsidy by the central government will be kept constant at Rs 22.58 per cylinder from 200405 and the remainder of the subsidy will be borne by the oil companies in the sector.
In order to evaluate the system, it is important to understand the monetary implications associated with this system. Taking into account the central government’s total allocation of kerosene to Delhi for sale at the subsidized price, the total domestic consumption of Rs 1,844.40 crore per year would have been the cost incurred by the PDS kerosene subsidies. However, excluding one-off costs of Rs. 590 crore, the total subsidy to LPG under the program is estimated at Rs. 1,673 crore per annum; considering a supply of 9 LPG bottles per connection per year.
This further points to an estimated saving of Rs 1.72 crore in subsidies in one year. The one-off costs of converting households from kerosene to liquid gas are amortized in about 3.5 years in the form of funding savings.