LPG for Every Indian Household

The Cabinet Committee on Economic Affairs approved the Pradhan Mantri Ujjwala Yojana, earmarking Rs. 8,000 crore for it, with the aim of providing five crore subsidised Liquefied Petroleum Gas (LPG) connections to women of poor households (Below Poverty Line) in the next three years. (The Finance Minister had made a Budgetary provision of Rs.2,000 crore in the current financial year to provide deposit-free LPG connections to 1.5 crore women of BPL families. Further, the Budget announced that the scheme would be continued for two more years to cover five crore households).

The Scheme Benefits

  • First, it has brought focus to the important developmental issue of enabling clean cooking energy. This is because indoor air pollution, caused by smoke from the traditionalchulha stove leads to 1.3 million premature deaths in the country every year.
  • Second, the scheme improves the quality of life of poor women whose health interests are usually neglected in household priorities.

The largest rural energy access survey of India (Conducted  by the Council on Energy, Environment and Water (CEEW) and the Department of Political Science at Columbia University)

  • Shows that as many as 95 per cent of LPG-deprived households cite their inability to pay as a barrier to their adopting LPG.
  • Thus, the scheme is well-targeted to address the crucial impediment of a high upfront cost, which has limited the transition towards LPG use in poorer households.
  • The survey was across 8,566 rural households in 714 villages of Bihar, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh and West Bengal.

Challenges that limit the use of  clean fuel in India Adoption and use gap

  • The high monthly expenditure incurred which 88 per cent of LPG-deprived households in the survey cited as a barrier.
  • Similarly, National Sample Survey Office (NSSO) data from the past also highlight the low expenditure capacity of poorer households in having access to LPG.
  • However the high recurring cost is not only a problem of purchasing capacity but also a perception and cash-flow issue. An increasing number of rural households rely on commercially procured biomass to meet their cooking energy needs.
  • The rural informal markets for firewood and dung cakes are thriving across India. CEEW analysis suggests that households that buy some or all of their biomass end up paying more than those who rely on LPG.
  • Thus, LPG would be an economically attractive proposition for such households. However, those relying completely on free-of-cost biomass (about 50-60 per cent of the rural population) would possibly opt for the subsidised connection, but would not spend on refilling cylinders regularly.

How to reduce the gap between adoption and sustained use The  threefold approach

  • First, creating awareness about the actual cost of fuel and its benefits, especially those related to health, over status quo.
  • Second, tackling the issue of cash flow, especially for the strata of population who find it difficult to pay for the aggregated cost of refilling a large cylinder. Introducing smaller LPG cylinders (2 to 5 kg) for this section could be a solution.
  • Third, leveraging mobile money for LPG payments. As LPG coverage expands in rural areas, the Direct Benefits Transfer of LPG (DBTL) subsidy programme could create additional barriers for economically weaker households. These could be in the form of no bank account or the distance the person travels to have access to banking services.

While the Pradhan Mantri Jan-Dhan Yojana has increased the number of rural households with bank accounts, we need innovative payment approaches to fill the gap of last mile access to banking services.

Deepening reach Limited LPG distribution networks in rural areas

  • Supposed to cover five crore households in the next three years.
  • The government and oil marketing companies have already established at least one LPG distributor in each block but much additional work needs to be done.
  • Most rural areas are served under the Rajiv Gandhi Gramin LPG Vitaran Yojana (RGGLVY) where the consumer has to collect the cylinder from a dealer and such consumers typically travel 3-11 km (one way).

Innovation is required in distributing LPG in the rural areas

Leveraging rural supply chains, only for the delivery of the regulated commodity, could be one such approach.