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8/12/2019 Energon - ACE 2

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By: Team ENERGON


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PDS Kerosene

60% of BPL use Kerosene forLighting Purpose only.

PDS Kerosene have been usedsubsidized in order to meet thebasic lighting and cookingdemand of BPL family

37.6% of PDS Kerosene isdiverted from its actual usage inAdulteration and Non Household Usage.

93959541 9505

9365 9303

7500

8000

8500

9000

9500

10000

20 04- 05 20 05-06 20 06- 07 20 07- 08 2008- 09 2

Usage of PDS Kerosen

Source: IISD, MoPNG


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LPG

40% LPG consumption is by Top 3 Deciles of Urbanpopulation which accounts only 5% of their expenditure.

76% LPG goes to Urban area and 40% is utilized byWealthiest population.

Source: MoPNG, Kirit Parik

Production Pattern have been constant over the last 30

years Consumption Pattern have been increasing with increase in

population and technological advancement

To meet the rising demands no major steps have been taken

till to meet the demands thus imports have risen with the

increase in demand.

Trends


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Sou

36

10

2025

32

15

29

45

913 14

16 17 16 1719

25

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

NOC Contribution (In Thousand Crore) Profit

Source: MoPNG, ONGC


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LESSONS LEARNT FROM VARIOUS SUBSIDY REFROMS ACROS

BRAZIL:

Brazils own experience in the 1980s demonstrates that subsidies can work

against the goal of the promotion of industrialization.

Under-pricing and state control caused low investment in exploration and

refining capacity by Petrobas, jeopardizing the countrys domestic oil supplies.

Once imposed, subsidies tend to become entrenched and politically difficult to reform.

Partial reforms lead to only partial benefits

INDONESIA:

In June 2001, prices for gasoline were raised by 26 per cent, diesel by 50 per cent and kerosene by 14 per cent, aiming to set

cent of the international market price and 75 per cent for prices of automotive diesel oil.

Industrial diesel oil and fuel oil Targeted Cash Transfers Can Reduce Opposition to Subsidy Reform and Assist the Poor.

Fuel conversion program from kerosene to LPG successfully achieving the governmentskey goal of relieving budgetary press


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IRANIAN SUBSIDY REFORMS The Reform Act stipulates a gradual price increase to no less than 90 per cent of the FOB Persian Gulf prices.

Shock therapy used for some energy products i.e around 80 per cent of their international prices in one go.

The parliament recently amended the Act to place a cap on energy price increases of no more than 90 per cent of Persian Gulf F

of Iran, 2012).

Only in-cash and in-kind payment of a maximum 50 per cent of the

revenues resulting from price increase to families giving consideration to

their average income. Energy prices were expected to further increase

another 30 per cent and the amount of the monthly cash payments rose

from IRR455,000 to IRR735,000 rials per person (Potential Scenarios, 2012).

Consumption of fuel oil decreased by 36.4 per cent, petrol 5.6 per cent,

diesel 9.8 per cent and kerosene 2.9 per cent.

Irans gas export capacity reached 9.1 billion cubic metres (bcm) in 2011 from

5.67 bcm in 2009, an increase of 82 per cent (British Petroleum, 2012).


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DIESEL :

Diesel losses had last touched about Rs 14 per litre in January, 2012.

Currently, diesel is priced at trade parity, of which 80 per cent is import price and 20 per

cent export rate.

A one rupee increase in diesel price will cut loss by Rs 4,522 crore in remainder of

current fiscal while a Rs 3 per litre increase would trim losses by Rs 13,565 crore

What reforms could be brought in India?

Burden should be borne by the consuming population considering the pattern of

consumption.

Export parity pricing should be the aim for now. Diesel should be sold on market prices.

Effect:Most importantly will increase the local state transport prices both road and rail,

which will affect the lower classes of society. This problem can be solved by charging

high the elite class services rather than the economic class.

Frieght cost should be bared by the end consumers.

Considering the below par average income families, special policy of Only in-cash and

in-kind payment can be opted like Iranian reforms.


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PDS Kerosene Kerosene: Oil firms are also losing Rs 36.83 per litreon kerosene sold through

ration shops

Total of Rs. 27,352 Crore of Under Recovery plus the Fiscal Subsidy

Reforms That could be brought :

Kerosene is more used for lighting than cooking. Electricity availability comes into

picture.

Till then, stringent allocation rules for proper distribution and allocation should

be brought avoiding illegal usages like Adulteration

Other way out is lifting subsidy on kerosene totally and then introducing in -

cash payment scheme for below par average income society. This information can

be integrated from various data collected by the income tax department or by the

banking sector for the accounting procedures.

More Technological Advancement in lighting(LED, Solar) should be made available

for Rural area so that usage of Kerosene is reduced and also RGGVY should be

pushed in order to speedily electrify Rural Area.


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Reforms needed : Uniform non subsidized rate in market

Direct Cash Transfer to respective holders account through income source(Ration Card, PAN Card, Aadhar Card)

These when implemented in more stringent environment bl

market of this fuels can be checked upon

Cancellation of LPG Connection for households having PNGConnection at home.

Compulsory PNG Connection in city where availability is the

LPG: The government losses almost around Rs 470/ 14.2 kgcylinder.


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To Continue Progress. 40 Crore of Indian Population living in Urban and Rural part of India are

Poverty Line. Subsidies are an important part of any economy. It cannot be abolished

but can be reduced with time as Schemes to educate and employ peoplthe per capita income and increase the affordability limit of people.

Rural Electrification also plays an important role to reduce the usage of Kerosene mainly used for lighting purpose.

Stricter Rules and Policy for allocation of Fuel Subsidy should be implem

Burden should be borne by the consuming population considering the pconsumption in case of diesel.

PNG should be encouraged. DBT is a decent initiative which can be imp

on a larger scale.

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