How is kerosene produced?
Petroleum or crude oil is the liquid which comes straight out of the oil wells. This liquid is of little use because it is a mix of various hydrocarbons, each having a different boiling point and ignition temperature, and hence it is necessary to separate them for more efficient use. The separation is done by a simple process known as fractional distillation. Thankfully, these hydrocarbons have progressive boiling points, so they can be easily separated by distillation — heating the oil and pulling out different products at different vaporizing temperatures. Using this method, petroleum gas (LPG), petrol, kerosene, diesel and lubricating oils are separated from each other. The residual is further processed to extract asphalt, tar, waxes and so on.
How are petroleum product prices determined in India?
India has to import about 80% of its total crude oil consumption. Given the very high volatility in international oil markets, the government continues to control prices of petrol, diesel, kerosene and LPG despite several past attempts to decontrol some of these.
Pricing is based on the presumed users. Petrol, for instance, is an item of final consumption and an increase in its price will have very little impact on inflation. So there is little pressure to subsidize it. Diesel, on the other hand, is a product whose price will have an impact on inflation. Trucks account for about 37% of overall diesel consumption in India and another 12% is used for agricultural purpose. The railways also are big users. An increase in diesel prices will have a cascading effect, hence the pressure to control its price. Kerosene is highly subsidized and the main objective is to provide lighting for the poor as it is estimated that 60% of kerosene consumption in India is for lighting purposes. Apart from kerosene, LPG is also highly subsidized. The subsidy is aimed at promoting a cleaner source of energy rather than the traditional practice of using firewood or dung cakes, which adds to pollution and has a negative impact on health.
Why do some people oppose the subsidy?
Studies have shown that about 35 to 40% of PDS kerosene never reaches its intended target. This diverted kerosene is used for adulterating diesel. The diversion means the government is not only subsidizing the petroleum mafia, but adulterated diesel is increasing the carbon footprints of the country. A lesser price difference, it is believed, would reduce these practices. Calculations show that at the present price level of the Indian basket of crude oil, which is about $92 per barrel, the price of petrol should be Rs 55.61, diesel Rs 43.76, kerosene Rs 34.23 and LPG about Rs 575.42 per cylinder. In reality, petrol is being sold at higher prices while the other three are subsidized. Kerosene is sold at Rs 9.23 per litre — a huge incentive for the oil mafia to use it in adulterating diesel.
What has the government done to check diversion of PDS kerosene?
The first attempt to detect the diversion of PDS kerosene was done in the 1980s, when the government introduced a blue colourant in PDS kerosene, but the petrol pump owners soon discovered a neutralizing chemical and the scheme was withdrawn. In 1989, a coupon system was introduced in Mysore. The consumer was supposed to give the coupon to dealers, which the dealer had to submit to the higher authorities for getting his payments. The system was withdrawn for unknown reasons. In 2005, global positioning systems were fitted on kerosene delivery tankers to check diversion, but itfailed. It is hoped that diversion will significantly dip after full implementation of UID-based smart cards.
Petroleum or crude oil is the liquid which comes straight out of the oil wells. This liquid is of little use because it is a mix of various hydrocarbons, each having a different boiling point and ignition temperature, and hence it is necessary to separate them for more efficient use. The separation is done by a simple process known as fractional distillation. Thankfully, these hydrocarbons have progressive boiling points, so they can be easily separated by distillation — heating the oil and pulling out different products at different vaporizing temperatures. Using this method, petroleum gas (LPG), petrol, kerosene, diesel and lubricating oils are separated from each other. The residual is further processed to extract asphalt, tar, waxes and so on.
How are petroleum product prices determined in India?
India has to import about 80% of its total crude oil consumption. Given the very high volatility in international oil markets, the government continues to control prices of petrol, diesel, kerosene and LPG despite several past attempts to decontrol some of these.
Pricing is based on the presumed users. Petrol, for instance, is an item of final consumption and an increase in its price will have very little impact on inflation. So there is little pressure to subsidize it. Diesel, on the other hand, is a product whose price will have an impact on inflation. Trucks account for about 37% of overall diesel consumption in India and another 12% is used for agricultural purpose. The railways also are big users. An increase in diesel prices will have a cascading effect, hence the pressure to control its price. Kerosene is highly subsidized and the main objective is to provide lighting for the poor as it is estimated that 60% of kerosene consumption in India is for lighting purposes. Apart from kerosene, LPG is also highly subsidized. The subsidy is aimed at promoting a cleaner source of energy rather than the traditional practice of using firewood or dung cakes, which adds to pollution and has a negative impact on health.
Why do some people oppose the subsidy?
Studies have shown that about 35 to 40% of PDS kerosene never reaches its intended target. This diverted kerosene is used for adulterating diesel. The diversion means the government is not only subsidizing the petroleum mafia, but adulterated diesel is increasing the carbon footprints of the country. A lesser price difference, it is believed, would reduce these practices. Calculations show that at the present price level of the Indian basket of crude oil, which is about $92 per barrel, the price of petrol should be Rs 55.61, diesel Rs 43.76, kerosene Rs 34.23 and LPG about Rs 575.42 per cylinder. In reality, petrol is being sold at higher prices while the other three are subsidized. Kerosene is sold at Rs 9.23 per litre — a huge incentive for the oil mafia to use it in adulterating diesel.
What has the government done to check diversion of PDS kerosene?
The first attempt to detect the diversion of PDS kerosene was done in the 1980s, when the government introduced a blue colourant in PDS kerosene, but the petrol pump owners soon discovered a neutralizing chemical and the scheme was withdrawn. In 1989, a coupon system was introduced in Mysore. The consumer was supposed to give the coupon to dealers, which the dealer had to submit to the higher authorities for getting his payments. The system was withdrawn for unknown reasons. In 2005, global positioning systems were fitted on kerosene delivery tankers to check diversion, but itfailed. It is hoped that diversion will significantly dip after full implementation of UID-based smart cards.
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