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Over 40 per cent of households in India have no access to modern lighting fuels.

With electrification yet to reach every village, kerosene is a major source of lighting for these households. It is provided at subsidized rates through the government-sponsored Public Distribution System (PDS). Yet the sale of kerosene at subsidized rates leads to high costs for the government and oil companies. In December 2011, the Government of Rajasthan, with support from the Central Government, launched a pilot scheme in Kotkasim, Alwar to test a system of direct transfers to the bank accounts of ration cardholders as a means of distributing PDS kerosene subsidies. Under the scheme, every ration cardholder is allocated 3 litres of kerosene per month at the market rate (which equals the depot rate plus state-level taxes). The subsidy amount (as determined by the state authorities) is then transferred to the bank accounts of the ration cardholder on a quarterly or monthly basis. This study was undertaken to assess and evaluate the pilot project in Kotkasim with a focus on answering the following issues: how the pilot project performed against its stated policy objectives; how the pilot project impacted kerosene-consuming households, including their ability to access the subsidy and effects on household expenditure; and the policy implications for the reform of the kerosene subsidy system more generally.