Kerosene Subsidies in India: The status quo, challenges and the emerging path to reform

The document analyzes the inefficiencies of India's Public Distribution System (PDS) for kerosene, noting high rates of leakage and poor targeting. It argues that current subsidies make solar lighting less cost-competitive for households, particularly for mid- and high-end systems. The authors recommend streamlining eligibility, phasing out subsidies in electrified areas, and redirecting funds toward a 'lighting subsidy' for solar solutions.

• India's kerosene subsidy system is plagued by massive leakage and corruption, with an estimated 45 per cent of PDS kerosene diverted to the black market, often to adulterate diesel fuel.
• The subsidy system fails to effectively target the poorest populations; the bottom 20 per cent of rural households receive only about 14 per cent of the allocated kerosene share for rural areas.
• Kerosene subsidies act as a financial barrier to solar adoption. While entry-level solar lanterns are slightly cheaper than kerosene even with subsidies, mid- and high-level solar systems are more expensive for households to operate than subsidized kerosene.
• Removing kerosene subsidies significantly improves the economics of solar lighting; for entry-level lanterns, the removal of subsidies would result in household savings of INR 760 over 1.5 years.
• The financial waste from kerosene leakage is substantial; the authors estimate that the funds lost to leakage could instead fund the capital costs of 350 million entry-level solar lanterns.
• The document recommends a transition toward a 'lighting subsidy' where expenditure is redirected from kerosene to solar solutions, alongside phasing out subsidized kerosene in electrified districts.

APA

Garg, V., Sharma, S., Clarke, K., & Bridle, R. (2017). Kerosene Subsidies in India: The status quo, challenges and the emerging path to reform. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/kerosene-in-india-staus-quo-path-to-reform.pdf

Chicago

Garg, Vibhuti, Shruti Sharma, Kieran Clarke, and Richard Bridle. Kerosene Subsidies in India: The status quo, challenges and the emerging path to reform. International Institute for Sustainable Development, 2017. https://www.iisd.org/system/files/publications/kerosene-in-india-staus-quo-path-to-reform.pdf.

Wikipedia

{{cite report |last1=Garg |first1=Vibhuti |last2=Sharma |first2=Shruti |last3=Clarke |first3=Kieran |last4=Bridle |first4=Richard |title=Kerosene Subsidies in India: The status quo, challenges and the emerging path to reform |publisher=International Institute for Sustainable Development |date=May 2017 |url=https://www.iisd.org/system/files/publications/kerosene-in-india-staus-quo-path-to-reform.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{garg2017kerosene, author = {Garg, Vibhuti and Sharma, Shruti and Clarke, Kieran and Bridle, Richard}, title = {{Kerosene Subsidies in India: The status quo, challenges and the emerging path to reform}}, institution = {International Institute for Sustainable Development}, year = {2017}, month = may, url = {https://www.iisd.org/system/files/publications/kerosene-in-india-staus-quo-path-to-reform.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }