NEWS  Subsidised LPG prices have increased by a massive 50% in this financial year alone.

Pradhan Mantri Ujjwala Yojana (PMUY)

• The scheme was launched in 2016 to distribute 50 million LPG connections to women of Below Poverty Line (BPL) families.
• Since 2016, PMUY has provided LPG connections to 8 million poor households to reduce women’s drudgery and indoor air pollution.
• Providing an upfront connection subsidy of Rs 1,600, PMUY helped expand LPG coverage to more than 85% of households.
• In comparison, less than a third of Indian households used LPG as their main cooking fuel in 2011.

CONCERNS

• multiple studies assessing PMUY have concluded that while access has increased, many new beneficiaries are not consuming LPG in a sustained manner.
• Large Scale primary surveys by the Council on Energy, Environment and Water (CEEW) suggest that, on average, recent PMAY beneficiaries consumed only about half the LPG compared to long standing regular consumers.
• Beyond causing indoor air pollution, biomass use for cooking contributes up to 30% to the ambient PM2.5 at the national level, more than the contribution of transport, crop residue or coal burning.

REASONS FOR LIMITED UPTAKE OF LPG AMONG POOR

• The effective price of LPG is not affordable for such households, despite the subsidy.
• Many rural consumers have access to freely available biomass, making it difficult for LPG to displace it.
• The recent increases in the subsidised LPG price have made it more difficult for the poor to sustain LPG use.

CHANGING PRICES

• India determines domestic LPG prices based on imported LPG price (we import more than 50% of our consumption).
• As the pandemic set in, the LPG subsidised price began to rise, even when global LPG prices plummeted, contributing to the refiners’ margins and government finances.
• At present, the LPG prices are rising globally and a 50% reduction in the LPG subsidy budget for FY22 (versus FY21) does not bode well.

BETTER TARGETING REQUIRED

• Currently, the government provides a uniform subsidy per cylinder to all LPG consumers. This allows many long-term LPG users, who are also middle- and higher-income households to use LPG even at a (higher) unsubsidized price.
• In contrast, economically poor households need a greater subsidy to make it affordable for them to use LPG as their main cooking fuel.
• One approach for such targeting is to rely on the existing LPG consumption patterns of consumers. Provide households exhibiting low consumption or a decline in LPG consumption over time with greater subsidy per cylinder to sustain health gains.
• The subsidy levels could be dynamic with different slabs reflecting the previous year’s consumption.
• Alongside, the deduplication efforts to weed out households with multiple LPG connections must continue to avoid subsidy leakages.

In the post pandemic rebuilding, the continued support to the economically poor for sustaining LPG use is not merely a fiscal subsidy but also a social investment to free up women’s productive time and reduce India’s public health burden. This social investment will yield rich dividends in the years ahead through a healthier and productive population.

Reference:

1. https://www.thehindu.com/opinion/op-ed/health-first-fiscal-prudence-later/article34013931.ece