Instead of the government providing subsidy to oil companies, prepaid cards with subsidy amount loaded can be provided to targeted consumers, The Energy and Resources Institute said in a study on 'Petroleum Pricing in India'.
The government should move to market determined prices of petrol, diesel, LPG and kerosene immediately.
Subsidised LPG and kerosene can be provided to targeted consumers by giving them prepaid cards from which the subsidy amount would be deducted every time a purchase was made.
This would help check black marketing and help track pattern and extent of subsidy utilisation, TERI study said.
"The Import Parity Pricing formula (used for calculating retail prices of fuel) needs to be re-visted to ensure that the Indian refining industry enjoys a rational margin that is fair to producers as well as consumers," it said.
Under the Import Parity Pricing formula, the retail price of fuel is calculated not by its production cost but at the price at which the fuel can be imported in the country.
"The production of kerosene in the country could be phased out over a period of time. International prices of LPG are cheaper than that of kerosene. As such, the government needs to emphasise on the consumption of LPG rather than of kerosene," it said.