Kerosene subsidy to be cut gradually

New Delhi: Modi government is now reforming kerosene subsidy the last territory in oil reforms left untouched till now. Centre has told oil companies from July to increase kerosene prices by 25 paise per litre for 10 months, said sources.

Following this oil companies on July 1 quietly hiked kerosene price by 25 paise a litre, the first increase in its price in last five years.

But the rates have so far not reflected in the price of kerosene sold through public distribution system (PDS). It will happen after state governments concur and they will have to issue notifications as kerosene is distributed through public distribution system of states. Centre has told oil marketing companies to inform about the hike to the states.

According to sources, the decision was taken since the government has still not been able to introduce direct benefit transfer in kerosene across the country.

Subsided kerosene is sold at Rs 14.96 a litre in Delhi, which results in a loss of Rs 13.12 per litre. Of the discount, the government bears '12 a litre and the rest of the bill is footed by upstream oil producers like ONGC.

Kerosene accounted for 41.7 per cent of the total petroleum subsidy of '27,571 crore in 2015-16. Diesel and petrol prices have already been de-controlled. As far as LPG is considered government has announced that it will not give any subsidy to those earning more than Rs 10 lakh in a year.

Also the number of subsidised LPG cylinders to a household in a year has been capped at 12 and subsidy is transferred though direct cash benefit scheme to curb subsidy leakage. Upstream companies would be major beneficiaries of the reform, especially at current or higher level of crude oil prices. ONGC stock was up by 3 per cent and Oil India by 1.67 per cent.