Government may launch inexpensive cooking oil scheme for poor

The government is considering a scheme for distribution of inexpensive cooking oil for the poor through the PDS that will be included in the 2009-10 budget to be presented by finance minister, Pranab Mukherjee on 6 July. The government had earlier launched a scheme to supply susidised oil to the poor in July 2008, which was valid till 31 March 2009.

With the UPA back in power, sources say the scheme may be re-introduced in the budget this year for the benefit of the poor. They point out that the subsidy outflow was not likely to be very high.

Unlike last year when the cost of import was susidised by the government by Rs15 per kg, this time the scheme may offer cooking oil at Rs30 per kg to families that are below the poverty line, irrespective of the import cost according to sources.

Last year, the scheme had come as a relief to the poor as the prices of the cooking oil had crossed Rs80 per litre.

If the subsidy is to be calculated against the current market price, analysts say, the government may need to provide Rs15-20 per kg which will push the monthly subsidy bill to Rs130 crore as Rs6.50 crore.

Last year, the government spent over Rs350 crore as subsidy on supply of cooking oil to the states at lower rates while it had incurred a loss of Rs280 crore by selling over 80,000 tonnes of imported oil which could not be distributed.

Under the earlier scheme about 1 million tonnes of edible oil at a subsidy of Rs15 per kg were to be distributed to the states, however public sector firms MMTC, PEC and STC as also agri-cooperative firm Nafed had imported 3.6 lac tonnes of edible oil under the scheme with states and union territories taking up 2.61 lac tonnes.

The states' demand for imported edible fell after prices slid to Rs50-60 a litre.

The PSUs reportedly hold around 10,000 – 12,000 tonnes of imported oil of the one lac tonnes that the states had failed to lift. The government had asked
the four trading firms to liquidate their stocks in open market while it agreed to bear the loss in the process.

India needs to import about 50 per cent of its requirement of about 12 million tonnes due to lower domestic output.