Con­sump­tion Falls 21%

The Economic Times - - Econ­omy: Macro, Mi­cro & More -

Prad­han has led a mas­sive drive to give 2.5 crore cook­ing gas con­nec­tions to the poor.

The price of cook­ing gas is also be­ing in­creased grad­u­ally to even­tu­ally align it with mar­ket rates. The govern­ment has been ag­gres­sively dis­cour­ag­ing use of sub­sidised kerosene, mainly used by the ru­ral poor for light­ing and cook­ing, as it is a pol­lut­ing fuel and some­times ends up as an adul­ter­ant at petrol pumps.

By cut­ting sub­si­dies, the govern­ment is bring­ing the com­mod­ity closer to the mar­ket price, which will even­tu­ally stop di­ver­sion for adul­ter­ation as well as en­cour­age con­sumers to switch to the cleaner liq­ue­fied pe­tro­leum gas (LPG). A record ex­pan­sion of cook­ing gas, espe­cially into the ru­ral and re­mote ar­eas, and in­creased sup­ply of elec­tric­ity in the past three years of the Modi govern­ment have pro­vided a cleaner sub­sti­tute for cook­ing and light­ing to peo­ple de­pen­dent largely on kerosene so far. Kerosene con­sump­tion has fallen 21% to 66,78,447 kilo litres in 2016-17 mainly on 20% cut in al­lo­ca­tion to states by the Cen­tre. A fi­nan­cial in­cen­tive to states tak­ing vol­un­tary al­lo­ca­tion cuts has al-

so be­gun help­ing re­duce kerosene sale.

The un­der-re­cov­ery for kerosene shrank to .₹ 11.39/ litre in 2016-17 from .₹ 27.93/litre in 2014-15. For a sub­sidised cook­ing gas cylin­der, the un­der-re­cov­ery went down to .₹ 108.78 in 2016-17 from .₹ 409.72 in 2014-15. Kerosene and cook­ing gas are the only fu­els cur­rently sub­sidised by the govern­ment. Prad­han had ear­lier lifted con­trols on diesel, which prompted Reliance In­dus­tries and Es­sar to build new petrol pumps. British oil ma­jor BP Plc has also taken ap­proval to set up petrol pumps in In­dia.

BP and its part­ner Reliance have also an­nounced in­vest­ment of $6 bil­lion in de­vel­op­ing a deep-sea gas field, fol­low­ing the govern­ment’s de­ci­sion to re­form gas prices and al­low higher rates for gas in chal­leng­ing ter­rains. Other re­forms un­der­taken by the govern­ment in­clude the end of the con­tro­ver­sial profit-shar­ing sys­tem, which obliges the oil min­istry to closely mon­i­tor oil­field ex­pen­di­ture, lead­ing to bit­ter dis­putes with pri­vate in­vestors. The govern­ment’s new ex­plo­ration pol­icy also al­lows mar­ket price for gas and gives com­pa­nies the free­dom to carve out ex­plo­ration blocks them­selves.

Re­forms such as diesel de­con­trol, grad­ual in­crease in LPG and kerosene prices along with the sharp fall in crude oil price in the last three years have shrunk the govern­ment’s fuel sub­sidy bill to .₹ 19,728 crore in 2016-17, much lower than .₹ 31,279 crore in 2014-15.

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