Challenges of Direct Benefit Transfer (DBT) for Kerosene

After the success of Direct Benefit Transfer (DBT) in LPG/Cooking gas, the government is planning to launch DBT in Kerosene as well. It has initiated the process by a pilot programme in 4 districts of Jharkhand. Under the DBTK Scheme, PDS kerosene is being sold at non-subsidised price, and, subsidy, as admissible, is being transferred to consumers directly into their bank accounts. This initiative of the governments is aimed at rationalising subsidy, cut subsidy leakages and reduce administrative costs. It, thus, seeks to benefit all stakeholders.

Challenges in Implementation

1. Lack of a streamlined and unified digital consumer database: The LPG consumers were all under Public Sector Oil marketing companies which made it easier to compile a consumer data. However, in case of Kerosene the consumer data is with individual states under their PDS system. Thus, coordination among the large number of State-level actors, especially in the case of a non-digitised PDS beneficiary database, can create barriers.

2. Differences between centre and states: While the Centre burns the fiscal impact of subsidy, the States determine the beneficiaries and quantum of subsidy. This is an important political currency for State governments. Thus, states must be aligned to this idea for its successful implementation.

3. The price difference between diesel and unsubsidized kerosene will still be high enough to give an incentive to the middlemen to divert the fuel as a diesel substitute.

4. Another challenge is in ensuring that the subsidy is accessible to its major beneficiariespoor households. Presently, the bank branches are not readily available in remote locations which increase the cost of withdrawing money.

What can be Done?

Studies show that kerosene is predominantly used as a lighting fuel in rural India, with less than 1 per cent of households using it as a primary cooking fuel. Thus, there is need to move towards solar-assisted solutions for lightening and LPG for cooking. This would be economically beneficial to government as well as households in the long-run.

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