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The high-powered BK Chaturvedi Committee has proposed restricting subsidised domestic cooking gas LPG and kerosene to only below poverty line families, while pricing the same for others at market rates.
"Fuel subsidies are only justified in the case of domestic petroleum fuels (kerosene and LPG) supplied to BPL families," the BK Chaturvedi Committee report said.
It proposed that smart cards be issued to BPL families for supply of subsidised kerosene in urban and semi-urban areas to cut diversion of the fuel to unintended users.
The panel also suggested a cash transfer system, whereby funds can be transferred to BPL families through a banking or postal system for purchasing of kerosene, instead of supplying the fuel much below the market price.
Kerosene in India is cheaper than bottled mineral water. At Rs 9.09 per litre, the fuel supplied through PDS shops is one-fifth of its market price and this price difference makes it a lucrative item for diversion into open market.
It "encourages diversion, resulting in both a loss to the exchequer and denial of availability to the targeted population," the report said.
The panel that was put together to look into the health of public sector oil companies said subsidised LPG should be restricted to just six refills per family in a year. This should subsequently be reduced to four refills a year, two in the following year and eventually be done away with.
Chaturvedi report said the scheme for kerosene should also be extended to rural areas subsequently while the prevailing system should be continued in the tribal and remote regions of the country.
The average number of LPG refills per household at present is estimated at 7.43, the report stated, adding that households should be encouraged to subscribe to the piped city gas network wherever available.
Actual sale of the product should be done at market price and on an unrestricted basis, it said stressing on the need for the modernisation of the distribution system.