Kerosene subsidies in India: When energy policy fails as social policy

Rao ND (2012). Kerosene subsidies in India: When energy policy fails as social policy. Energy for Sustainable Development 16 (1): 35-43. DOI:10.1016/j.esd.2011.12.007.

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Abstract

Kerosene subsidies intended for Indian households have been known for their poor targeting and high fiscal costs. However, the distributional benefits to the 160 million households that use kerosene are not well understood. In this paper, the kerosene subsidy is formally assessed as an instrument of income redistribution. The subsidy incidence, progressivity and efficacy of the kerosene subsidy are calculated for the state of Maharashtra, under actual and ideal implementation conditions.

The analysis shows that kerosene subsidies are regressive and of minimal financial value to poor rural households. This is in part because household quotas are based on cooking needs, but kerosene is used predominantly for lighting. In urban areas, subsidies are progressive, and provide benefits of up to 5 to 10% of household expenditure among poorer households which lack affordable access to LPG and biomass. Overall, only 26% of the total subsidy value directly reaches households. This analysis suggests that subsidies targeted only to kerosene-dependent urban areas would have a higher efficacy than broad-based subsidies.

Item Type: Article
Uncontrolled Keywords: Kerosene; Developing countries; Climate change mitigation; India; Energy subsidies; Distributional impacts
Research Programs: Energy (ENE)
Postdoctoral Scholars (PDS)
Bibliographic Reference: Energy for Sustainable Development; 16(1):35-43 (March 2012) (Published online 25 January 2012)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:46
Last Modified: 22 Feb 2016 15:14
URI: http://pure.iiasa.ac.at/10022

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