Consumption Falls 21%
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.