Decisions of Scrapping the Subsidies in Kerosene Supply in India: How Will It Affect the Poor?

Abstract

This research aims at exploring the impact of scrapping kerosene subsidy on the welfare of the poor. In India, still 31 % of households use kerosene fuel as an alternative source of energy to illuminate their house, especially in rural India. Kerosene along with the other social security goods has been disbursed at a highly subsidised rate for a long time. Off late, a new policy vows at scrapping such subsidies as a strategy to reform and restructure the energy sector. Keeping these things in consideration, the study views scrapping policy as having an adverse impact on people. The present study employs the latest census record (2011) on household energy consumption—source of lighting—for the analysis. The results bring to light a wide divide at various spatial levels of evaluation with regard to usage of kerosene and electricity for lighting purposes within the household. Apart from the gap at rural, urban, national, state and district level, the districts of the Empowered Action Group (EAG) states which are traditionally lagging behind in all the development indicators form a cluster of the major consumers of subsidised kerosene. The study also reveals that the below poverty line (BPL) population in these states has inflated at a rapid scale which could get affected with the new policy. Although kerosene, as a source of energy, is not green, it needs to be subsidised till there is a universal access to electricity.