I would rather suspect the color is put in to distinguish kerosene intended for internal combustion engines (it is similar to diesel) which incurs a road tax, from kerosene intended for heaters and lamps, which is not road taxed. Nobody would want to drink either form of the stuff, and the color shouldn't matter for heating and lamps. Caveat -- what we call kerosene in the USA may have a different name in India and vice versa.
There is a process, but I'm suspicious for your reasons. The colour does not affect the Kerosene, so the only reason you may wish to do this is to drink it. The colour is put there to stop people driking it as it is extremely toxic.
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