Thursday, December 23 2004 17:38 Hrs (IST) - World Time -

New Delhi: Subsidy for domestic cooking gas should be phased out gradually while coupons may be issued to poor for purchasing kerosene at concessional rates from the open market, a report tabled in Parliament said.

"LPG subsidy benefits largely the higher expenditure groups in urban areas and may be regressive," says the report on 'Central Government Subsidies in India', prepared for the Finance Ministry by National Institute for Public Finance and Policy.

"Kerosene subsidy is prone to misutilisation with about half of the supplies diverted and never reaching the intended group," the report tabled by Finance Minister P Chidambaram said today (Dec 23, 2004).

It noted that urban areas receive a larger subsidy on kerosene while limited availability forces rural population to use it for lighting purposes rather than cooking.

"These arguments suggest that LPG and kerosene subsidies are ineffective in serving the desired objectives," it said recommending removal of LPG subsidy in a gradual manner or at least a substantial reduction in the subsidy element.

A more cautious approach may be taken for kerosene, it said, adding an open competitive market should be created for kerosene and coupons may be issued to poor ration card holders to enable them to purchase the fuel at a subsidised rate.

Kerosene subsidies peaked to Rs 8,151 crore in 1999-2000 and came down to Rs 3,018 crore in 2002-03, while LPG subsidy stood at Rs 3,691 crore.