Government is also exploring whether kerosene subsidy can be delivered through Direct Benefit Transfer.

The Modi government is working on eligibility criteria for subsidised LPG cylinders and it is likely that households with incomes above a certain threshold will not be provided the subsidy. The government is also exploring if the kerosene subsidy can be delivered through Direct Benefit Transfer (DBT). DBTs for the subsidy on LPG cylinders that had been suspended by the previous government are likely to be resumed.

The Modi government’s strategy for rationalising the ballooning fuel subsidy is to go for better and transparent targeting, Minister of Petroleum and Natural Gas Dharmendra Pradhan told The Hindu.

“We won’t cut the subsidy to the poor; instead we will reduce the government’s subsidy bill by plugging the leakages and through better targeting,” Mr. Pradhan said. “We will have a public debate on who should get subsidised cylinders before finalising the criteria.”

The Centre could seek the States’ help to compile the database of consumers of fuel subsidies for plugging leakages and improving targeting.

“Two or three States have already implemented pilots and we would like to talk to the States in the implementation of our innovative model,” said Mr. Pradhan.

In the current fiscal, subsidy on diesel, LPG and kerosene is estimated at Rs. 115,548 crore. Of this, LPG accounts for Rs. 50,324 crore and kerosene Rs. 29,488 crore. The subsidy cost on diesel is estimated is Rs. 35,736 crore but if the monthly retail price increases continue as planned, it could come down.

In 2013-14, the government had paid Rs. 70,772 crore in cash subsidy while upstream firms had borne as their share Rs. 67,021 crore of the subsidy bill. In 2012-2013, the government had paid out Rs. 100,000 crore and the upstream companies had taken a hit of Rs. 60,000 crore.

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