Kerosene DBT can result in 40% savings on under-recoveries

The proposed extension of the direct benefit transfer (DBT) scheme to kerosene could result in an estimated savings of up to 40 per cent on under-recoveries if implemented nationally, says a report.
The proposed DBT scheme can result in an estimated 30-40 per cent savings annually on kerosene under-recoveries if implemented nationally, ratings agency Icra said in a note.
It also said the under-recovery from kerosene is likely to fall from Rs 24,800 crore in 2014-15 to Rs 12,500 crore in 2015-16 on falling crude prices and increasing penetration of cooking gas.
The report, however, warns that the implementation is a major challenge as kerosene distribution is done through PDS outlets handled by the states, unlike LPG, which is directly sold by the central government-owned oil marketing companies.

On January 1, the government said it would roll out LPG-like DBT scheme for kerosene from April 1 wherein the users will buy the cooking fuel at market rate but will get financial support directly in their bank accounts.
The cash subsidy to be paid to users will be equivalent to the difference between current PDS price of about Rs 12 and market rate of Rs 43 per litre. .

On the impact of the scheme on oil marketers, the report said if the average crude prices remains at USD 60 a barrel and the Rupee trades around 66.50 to the dollar, the under-recovery burden on kerosene could be Rs 9/litre, while the total burden will be Rs 21/litre.

The scheme will be rolled out from April 1 in Raipur, Durg and Bilaspur in Chhattisgarh, Panipat and Panchkula in Haryana, Shimla, Solan and Una in Himachal Pradesh, Chhatra, Giridih, East Singbhum, Hazaribagh, Jamtara and Khunti in Jharkhand.
Besides, the scheme will be implemented in Hoshangabad, Harda, Khandwa and Burhanpur in Madhya Pradesh, Amaravati and Latur in Maharashtra, Taran Taran, Pathankot and Mohali in Punjab and Pali, Jhunjhunu and Kota in Rajasthan, the government had said.