Reforming Kerosene Subsidies in India

The report argues that India's kerosene subsidy program is highly inefficient due to significant leakages and poor service quality. It proposes replacing these subsidies with targeted support for solar-based lighting in rural areas and liquefied petroleum gas (LPG) for urban-poor households, asserting that such a transition would be economically beneficial for both the government and the beneficiaries.

• The distribution of subsidized kerosene through the Public Distribution System (PDS) is marred by high leakage, with only 49 per cent of the fuel actually reaching households at the subsidized price and about 34 per cent never reaching them at all.
• Kerosene use differs significantly by geography: in rural India, it is primarily used for lighting, while in urban areas, it is predominantly used for cooking.
• Transitioning rural households from kerosene to alternative lighting solutions could result in net annual savings for the government between INR 8,000 and 12,000 crore over the lifetime of the alternatives.
• Shifting urban-poor households from subsidized kerosene to subsidized LPG for cooking would increase government expenditure by approximately INR 600 crore per year, but would improve overall social welfare and eliminate the health risks of kerosene.
• Direct Benefit Transfer for Kerosene (DBT-K) is viewed as limited in its potential because it does not address the inefficiency of the fuel itself and may exclude low-income households who lack access to banking services.
• The adoption of alternative lighting in rural areas is hindered by high upfront costs, poor after-sale service, and a market-driven approach that excludes the poorest households.
• Urban-poor households face specific barriers to LPG adoption, including bureaucratic hurdles regarding address proof in unauthorized slums, high connection costs, and the unaffordability of large 14.2 kg cylinders for daily wage earners.
• A successful transition would require the rehabilitation of kerosene wholesale dealers and retailers, such as granting urban dealers licenses for small (2-5 kg) LPG cylinders or providing rural dealers with training to enter the off-grid sector.

APA

Jain, A., & Ramji, A. (2016). Reforming Kerosene Subsidies in India. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/reforming-kerosene-subsidies-india.pdf

Chicago

Jain, Abhishek, and Aditya Ramji. Reforming Kerosene Subsidies in India. International Institute for Sustainable Development, 2016. https://www.iisd.org/system/files/publications/reforming-kerosene-subsidies-india.pdf.

Wikipedia

{{cite report |last1=Jain |first1=Abhishek |last2=Ramji |first2=Aditya |title=Reforming Kerosene Subsidies in India |publisher=International Institute for Sustainable Development |date=April 2016 |url=https://www.iisd.org/system/files/publications/reforming-kerosene-subsidies-india.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jain2016reforming, author = {Jain, Abhishek and Ramji, Aditya}, title = {{Reforming Kerosene Subsidies in India}}, institution = {International Institute for Sustainable Development}, year = {2016}, month = apr, url = {https://www.iisd.org/system/files/publications/reforming-kerosene-subsidies-india.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }