The Centre will consult states on direct transfer of kerosene subsidy in cash to the intended beneficiaries instead of current practice of subsidising the fuel, Oil Minister S Jaipal Reddy said on Monday.

"We cannot finalise any programme on kerosene unless we discuss (it) with the state governments," Reddy told reporters after a meeting of an Empowered Group of Ministers (EGoM) that considered the recommendation of the Task Force on Direct Transfer of Subsidies on Kerosene, LPG and Fertiliser.

The Task Force in its interim report has suggested ending the sale of subsidised kerosene. Kerosene price in Delhi at Rs 14.83 per litre is Rs 24.93 a litre short of its cost price. It wants the fuel to be priced at Rs 39.76 a litre and the poor (the intended beneficiary of government subsidy scheme) should be given Rs 24.93 in cash for purchasing every litre of kerosene.

Oil Ministry, Reddy said, will in next few weeks have discussions with state governments to evolve a consensus on the issue.  "If state governments agree to cash transfer, then to give proper effect to such proposal, all the beneficiaries have to have a bank account where the cash subsidy can be transfered," he said.

"In the Phase-I, cash will be transfered to accounts of the state governments. State governments should agree to distributed the cash to all beneficiaries," he added. Reddy said the EGoM headed by Finance Minister Pranab Mukherjee accepted the interim report of the Task Force.

To begin with, pilot projects may be launched to test direct transfer of cash subsidy to the targeted populations in few states. Seven states -- Tamil Nadu, Assam, Maharashtra, Haryana, Delhi, Rajasthan and Orissa -- have been identified for launch of the pilot projects from October, according to the road map suggested by the Unique Identification Authority of India (UIDAI).

Reddy said the proposal for limiting supply of subsidised domestic LPG cylinders to four per household in a year would be taken up at the next EGoM meeting. The limited supply of subsidised LPG would be for those who own a car, two-wheeler, house or figure in the income-tax list.

Last week, the Parliamentary Standing Committee on Petroleum and Natural Gas suggested ending sale of subsidised domestic cooking gas (LPG) to people with income of more than Rs 6 lakh per annum.

A 14.2-kg LPG cylinder costs Rs 395.35 in Delhi. This is Rs 247 short of its market price. If the panel recommendation is accepted, people with more than Rs 6 lakh per annum household income will have to pay Rs 642.35 per bottle.

The panel stated that those holding constitutional posts, public representatives like MPs, MLAs/MLCs, too, should not get subsidised cooking fuel. If approved, every household will get only four LPG cylinders at subsidised price of Rs 395.35 in Delhi and they will have to pay market price of about Rs 643 per bottle for any requirement beyond that.

Each 14.2-kg bottle of LPG normally lasts a household 45-60 days and based on this calculation a maximum of six cylinders are considered enough to see a family through the year. Currently, records of LPG distributors of public sector companies shows that a vast number of households are taking as many as 20 to 30 cylinders per household each year.

This suggests that large-scale diversion of subsidised cooking gas is taking place for use in commercial establishments, such as restaurants and dhabas and as auto fuel. LPG for commercial use is sold at the market price and packed in different cylinders.

In the second phase, the difference between the current retail price and the actual market price will be paid directly to BPL cardholders. This would be delivered through the unique identification number, Aadhar, as it is commonly known.