LPG for every Indian household

Within a fortnight of the recently announced Union Budget, 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 is remarkable for two reasons. 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 traditional chulha 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 which was conducted last year 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. While the move is appreciable, other challenges that limit the use of this clean fuel in India must be resolved simultaneously.

Adoption and use gap

One such challenge is the high monthly expenditure incurred which 88 per cent of LPG-deprived households in the survey cited as a barrier.

The survey was across 8,566 rural households in 714 villages of Bihar, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh and West Bengal. 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. We need to focus on reducing this gap between adoption and sustained use.

In this, a threefold approach is needed. 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 also need simultaneous attention 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). Here, the consumer has to collect the cylinder from a dealer. Such consumers typically travel 3-11 km (one way). Innovation is required in distributing LPG in the rural areas, beyond the traditional realm of a dealership model. Leveraging rural supply chains, only for the delivery of the regulated commodity, could be one such approach.

Finally, the third major barrier — awareness and administrative issues. About 40 per cent of LPG-deprived households in rural areas cite a lack of information about the process of getting a connection as a challenge. Therefore, awareness creation in rural areas and among the urban poor is a must. For households in urban slums, the absence of residential proof or a lack of interest by urban dealers to serve them also pose a barrier. The government’s scheme of selling 5 kg LPG cylinders at petrol pumps and kirana stores may help, as proof of address is not required. However, its limited penetration and retail pricing still make it challenging for many poor households. Opening exclusive dealerships for smaller cylinders (2 and 5 kg), with specific provisions to serve urban poor areas, could help overcome some of these challenges.

It is welcome that the government has recognised the importance of clean cooking energy with the launch of this mammoth scheme. However, we need to go beyond subsidising connections and fuel costs and focus on issues of cash flow, awareness, availability and administration. Only such a comprehensive approach will help poor households have a better life.

(Abhishek Jain is a researcher at the Council on Energy, Environment and Water, an independent not-for-profit policy research institution in New Delhi.)

Posted by on March 24, 2016. Filed under State. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.