This columnist, while not quite born with a silver spoon, is also fortunate to be not living on the wrong side of the railway track either.
A benevolent providence has ensured that, in all these years, yours truly has been spared much of the struggle that the common man is exposed to in the ordinary course of day-to-day living. In the long list of struggles he is exposed to, sourcing kerosene from the open market must undoubtedly rank nearly at the very top!
If your ration card is not stamped with the magical endorsement for kerosene, you might as well forget about getting a drop of kerosene for cooking (when LPG runs out) or for lighting (when the inverter battery is completely drained of electrical charge).
Well-guarded secret
The oil marketing companies claim there are about 6,500 outlets spread across the country, vending kerosene at a non-subsidised rate of ₹27 or so per litre. Since their existence is such a well-guarded secret, they might as well not exist. Not that 6,500 is such a big number for a country with a geographical spread as large as India’s, or so I thought. But last week, fate conspired to put me in precisely such a situation — of having to look for one such store.
The retail outlets for kerosene do not come with a ‘Zomato’ type list that restaurants boast of. So Google isn’t much of a help here. However, one contact led to another and, after reaching out to a series of intermediaries, I finally succeeded in securing a litre of kerosene from the black market at a non-subsidised rate of ₹70 per litre.
The Government says if we extrapolate the sample survey data to the country as a whole, there is an illegal diversion of as much as 15 lakh kilolitres of kerosene meant for supply under the public distribution system (PDS).
I am amazed that the diversion is as little as that, considering the price differential between PDS kerosene and the market price of diesel, with which it is adulterated. No matter its actual size, the fact remains that I made my humble contribution to lubricating the wheels of this black market in kerosene with my purchase last week.
The solution
The Government wants to put an end to it, and has come out with a new scheme, to be launched on a trial basis in 26 districts across a number of States from April 1, for kerosene to be delivered to the common man at a subsidised rate of ₹12 per litre. This is planned through a ‘Direct Benefit Transfer’ scheme on the lines of supply of LPG.
As the Government’s press release said, once the scheme is introduced, the consumer will pay the un-subsidised price (market price) of kerosene at the time of purchase. Subsequently, the amount of subsidy will be transferred to the bank account of the beneficiary.
To avoid any inconvenience to the beneficiary through payment of un-subsidised price, the subsidy shall be credited to eligible beneficiaries in advance during the initial purchase.
Incentivising the State
The other component of the scheme involves incentivising the States, so they acquire a stake in the success of the scheme. This is sought to be achieved by giving a share of the savings in subsidy payout by the Centre, to the States.
As much as 75 per cent of the savings in the first two years, and thereafter 50 per cent and 25 per cent in the third and the fourth years, will be given to them. If there is a bogus ration card created at the shop level, it would be detected at the bank’s end through the application of the KYC norms.
Moreover, bogus cards are created with the connivance of local politicians at the ward level. Hence, profits from black market sale of kerosene, which currently accrue to those managing the ration shops and petty politicians at the ward level of ‘panchayats’ or municipalities where the ration shop is located, would now flow into the coffers of the State Governments. They would therefore activate the enforcement machinery to go after the ghost ration cards and plug the leakage.
No flaws — yet
As schemes go, there is nothing that you can put a finger on, as an obvious flaw. But I am not very sanguine about the prospects of its success, the Government’s optimism notwithstanding.
It is not as if the ruling party at the State level is unaware of the identity of the beneficiaries (usually ward-level political workers) of such illegal diversion of PDS kerosene to the black market. But these petty politicians who constitute the foot soldiers of the political machinery, are essential to every political party, come election time.
The ruling party would not want to do anything that undercuts a source of income, without which these foot soldiers couldn’t afford to perform the role of a full-time, grassroots level worker for whichever party happens to be in power.
A marked reluctance to stop leakage is almost a given. To compound matters, the Centre too is trying to be very clever by wanting to skim off the top 10 per cent of savings that would accrue from the efforts of the State Governments. The scheme assumes a baseline for calculation of savings that is set at 90 per cent of the 2015-16 allocation of kerosene for supply through the PDS.
The drawback
By far the biggest drawback of the scheme, from a managerial perspective, is the scant attention it pays to creating a vibrant private market in un-subsidised kerosene for ration card holders to feel incentivised to switch over to the new system.
A surface characteristic of the market, no doubt, is that it is a place where buyers and sellers can meet and engage in commerce. In that sense, a ration shop is every bit a market place. But there is also another, more subtle feature of a market which is not often recognised, but nevertheless is at the very heart of a market place — a market is also a place where consumers have an array of choice in the form of sellers to choose from.
Possibility of sabotage
Absent this characteristic, a vital function of the market is taken away. The benefits that are supposed to accrue to both buyers and sellers — in the sense that both go away with the feeling that they have benefited from the exchange — is lost. In a situation where the ration shopkeeper has every incentive to sabotage the new scheme, he can punish the consumer who opts for the scheme by simply charging a premium over the official PDS price.
The consumer can do little to challenge it. The shopkeeper can also claim to have run out of stock or do any number of things by which the consumer is deprived of the much-needed kerosene. Considering the commodity is used by the most vulnerable section of the society, the fact that there is money in the bank to cover the market price of kerosene is small comfort, if there is nothing to fuel the stove for cooking the evening meal.
What the Government must do simultaneously with the launch of the new scheme is stock ordinary grocery stores with half-litre and one-litre bottles of kerosene, in the same abundance as the Pepsi and Coke bottles that dot the shelves.