The main argument against subsidy in kerosene is:
It encourages diversion of kerosene to black markets as dealer gets it for subsidized price. So he can make enormous profits by selling it at market price.
Rajasthan government launched a pilot project in Kotkasim to sell kerosene at market prices to prevent this diversion. The subsidy is provided by government to the benefactors by direct transfer in their bank accounts.
To sum up:
No subsidy to dealer. So he buys at market rate and sells at market rate.Dealer gets the market rate when buyer purchases and buyer is compensated by government by transfer to bank account.
Although a well-intentioned effort, the plan has left the buyers unsatisfied, with legitimate buyers not buying less kerosene, while some have to use their pension fund for making the purchase.
WHY?
The success of plan hinged on the "Bank account transfer"
The government plan seems to have failed to ensure that all the buyers have bank accounts and transfers are regular.
After nearly a year, some have got only transfer amounting to 6 months, others only 3 months and many have not be able to open a zero balance bank account despite shelling 500 Rupees.
This is clearly a case of ill-preparedness in launching schemes.
To further add insult to injury the pilot plan is being touted as success due to reduced kerosene demand, without any third party evaluation of satisfaction of the beneficiary.
Devil's advocate :
I do concede the point some would say that a lobby of kerosene dealers would like and portray the scheme as failure as it reduces their profits of black marketing.
The crux of the matter is :
- Did the government ensure all beneficiaries have easy access to bank accounts?
- Who decides whether Pilot project is successful. It cannot be the government nor the kerosene dealers but an autonomous third party (like CAG). Is there any at present?
Not to my knowledge.
Reference: http://www.thehindu.com/opinion/lead/neither-effective-nor-equitable/article4161139.ece
