India's state gov't likely to oppose direct subsidy for kerosene

Anindita Chowdhury in Kolkata/The Statesman
Asia News Network

Kolkata (The Statesman/ANN) - After spiking the Teesta water sharing agreement, the Lokpal Bill and the foreign direct investment in multi-brand retail, the state government is poised to lock horns with the central government over giving direct subsidy to consumers of kerosene, as announced by India's Union finance minister Pranab Mukherjee in his Budget speech.

Although the proposed move is directed towards preventing black-marketing of kerosene, the state government has found quite a number of lacunae in the system of depositing the direct cash subsidy into the bank accounts of poor consumers.

The state government is apprehensive that this system may reduce the total quota of the state government for kerosene in the future, since the consumer may decide to spend the cash subsidy on other things instead of buying kerosene. In that case, the state's offtake would fall in the long run and subsequently lead to the reduction in the state government's overall quota.

Moreover, the central government proposes to give the funds to the state government, which will then pass on the subsidy to consumers who are in possession of ration cards. According to food department officials, this would cause more problems as they do not have the mechanism to implement the system.

The state government is already facing difficulties while procuring food grains from farmers as well as in the Mahatma Gandhi National Rural Employment Gurantee Act, where wages have to be directly transferred to bank accounts or payments made by cheque.

It has been more or less decided that the state would object to the direct subsidy move, but it is yet to be decided at what level the issue will be tackled. The state food and supplies minister, Jyotipriya Mullick, refused to comment on the state's stand, saying that he was still awaiting a decision from the chief minister, Mamata Banerjee, on the issue. "The file is in the chief minister's office,¿ said Mullick.

The chief minister has several meetings lined up in Delhi in the next few weeks, including one with the Planning Commission, and she may take the issue up.

The Nandan Nilekani committee, it may be noted, had recommended giving direct subsidy to eligible consumers for kerosene, LPG and fertilisers.