- Subsidised LPG prices have increased by a massive 50% in this financial year alone. This would have a significant impact on the government’s flagship scheme, the Pradhan Mantri Ujjwala Yojana (PMUY).
- Since 2016, PMUY has provided LPG connections to 80 million poor house holds to reduce women’s drudgery and indoor air pollution. Providing an upfront connection subsidy of ₹1,600, PMUY helped expand LPG coverage to more than 85% of households.
- Large-scale primary surveys by the Council on Energy, Environment and Water (CEEW)suggest that, on average, recent PMUY beneficiaries consumed only about half the LPG compared to long-standing regular consumers. Limited uptake of LPG among poor households has two main reasons.
- First, the effective price of LPG is not affordable for such households, despite the subsidy.
- Second, many rural consumers have access to freely available biomass, making it difficult for LPG to displace it.
- Beyond causing indoor air pollution, biomass use for cooking contributes up to 30% to the ambient PM2.5at the national level, more than the contribution of transport, crop residue or coal burning.
- The recent increases in the subsidised LPG price have made it more difficult for the poor to sustain LPG use.
- As the pandemic set in, the LPG subsidised price began to rise, even when global LPG prices plummeted.
- Now with LPG prices rising globally, a 50% reduction in the LPG subsidy budget for FY22 (versus FY21) does not bode well.
- The information about LPG price build-up and subsidy has become more difficult to obtain in recent years.
- The central government tread should balance between LPG subsidies and sustained clean fuel consumption in poorer households by better targeting of subsidy.
- 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. Further, the subsidy levels could be dynamic with different slabs reflecting the previous year’s consumption.
- Alongside, the de-duplication efforts 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.