New Delhi, Nov 24: While Railway Minister Mamata Banerjee thinks she's done a great job for the poor by forcing Prime Minister Atal Bihari Vajpayee to roll back the kerosene price hike by one rupee, guess who's benefited most from her action? No it's not really the poor, since they hardly get kerosene anyway - in most parts of rural India, kerosene sells in the black market, at a price around double the official ration shop price. According to experts in the oil industry, anywhere between 30 and 40 per cent of the total 10 million-odd tonnes of kerosene sold in the country each year is diverted to mix with diesel - both diesel and kerosene have very similar properties, or `cuts' in oil jargon, but have very different tax rates and prices. This sharp difference is what makes it so profitable to mix kerosene in diesel - as a result of these differences, and government policy to price kerosene cheaply, diesel costs Rs 16.55 per litre in Delhi as against Rs 7.35 for kerosene at the ration shop. The customs duty on diesel is 25 per cent, while that on kerosene meant to be used in ration shops is nil. And sales tax differential varies from 8 per cent in areas like Delhi to 25 per cent in Madhya Pradesh. So, if kerosene is diverted to diesel, the average duties the exchequer loses is a whopping Rs 2,200 crore. Add to this, the subsidy the government spends on this kerosene, and that's another Rs 3,200 crore. Where's the proof of this, you'll do well to ask, apart from the statements of various oil dealers, oil company executives, and top bureaucrats who generally wish to remain anonymous? There's none, in the sense that since the properties of diesel and kerosene are so similar, even if you test any random sample of diesel with a 40 per cent kerosene mix, you'll hardly know the difference. There's a whole host of statistics, however, which conclusively point to this large-scale adulteration of diesel with kerosene. This year, thanks to the insistence of petroleum minister Ram Naik, for instance, one crore fresh LPG connections were given by the state-owned petroleum firms - Naik's argument was that poor people use kerosene for cooking, and that's far more expensive than LPG. Logically then, one crore families should have given up their kerosene entitlement from ration shops; considering that each family gets an average of 10 litres a month, total kerosene consumption should have fallen by one million tonnes. Yet, the sales figures for the period April to October this year show that kerosene consumption has not fallen by this amount, in fact it has increased marginally over last year's 6.2 million tonnes. Clearly, then this million tonnes are being used elsewhere, possibly to adulterate diesel with. It gets better. While consumption of petroleum products like petrol and LPG have risen by around 14 to 15 per cent this year in the April to October period, sales of diesel to the retail consumer (essentially for the transport sector) have grown by just 1.3 per cent, as against growth of 5.3 per cent last year. Clearly, with a larger amount of diversion of kerosene taking place to mix with diesel, the official diesel sales can afford to grow at a slower pace. Oh yes, the last time that diesel prices were put on par with kerosene was in the early 70s, and this was done to check the rampant adulteration of diesel with cheaper kerosene. Immediately, demand for kerosene fell by around a fourth! Today, with the price differential between diesel and kerosene many times higher, the amount of diverted kerosene has naturally risen much more. An interesting aside to Mamata Banerjee's actions resulting in the gap between diesel and kerosene prices rising to an all-time high, is that the money to be made from kerosene dealerships is now on the increase. Petroleum ministry sources confirm that companies like IOC and HPCL have got anywhere between 50 to 70 applications from erstwhile dealers, asking that their dealerships be revived. Now since kerosene dealerships in themselves are not too profitable - many of these dealers had cancelled their dealerships around the mid-70s - the real money comes from the grey market.
