DAILY NEWS ANALYSIS

GS-III : Economic Issues Government policies and interventions

08 March, 2021
5 Min Read

Pradhan Mantri Ujjwala Yojana-Analysis

Introduction

Subsidised LPG prices have increased by a massive 50% in this financial year alone, consistently capturing headlines.

About Pradhan Mantri Ujjwala Yojana:

Launched in May 2016.
To provide LPG (liquefied petroleum gas) connections to poor households.
A deposit-free LPG connection is given to eligible with financial assistance of Rs 1,600 per connection by the Centre.

Eligibility

Applicant must a woman above the age of 18 and a citizen of India.
Applicant should belong to a BPL (Below Poverty Line) household.
No one in the applicant’s household should own an LPG connection.
The household income of the family, per month, must not exceed a certain limit as defined by the government of the Union Territories and State Government.
Applicant must not be a recipient of other similar schemes provided by the government.

Objectives

Empowering women and protecting their health.
Reducing the serious health hazards associated with cooking based on fossil fuel.
Reducing the number of deaths in India due to unclean cooking fuel.
Preventing young children from significant number of acute respiratory illnesses caused due to indoor air pollution by burning the fossil fuel.

Did PMUY achieve its intended benefits?

Providing an upfront connection subsidy of ?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.
However, multiple studies assessing PMUY 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 PMUY beneficiaries consumed only about half the LPG compared to long-standing regular consumers.

Reasons for poor uptake of LPG by poor people

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 PM2.5 at the national level, more than the contribution of transport, crop residue or coal burning.

Changing prices

The recent increases in the subsidised LPG price have made it more difficult for the poor to sustain LPG use.
India determines domestic LPG prices based on imported LPG price (we import more than 50% of our consumption).
The government’s lack of transparency in the pricing of subsidised LPG adds further to the citizen's plight.

Better targeting

The answer lies in better targeting of subsidy.
Currently, the government provides a uniform subsidy per cylinder to all LPG consumers (PMUY or otherwise).
Many long-term LPG users, who are also middle- and higher-income households, will continue to use LPG even at a (higher) unsubsidised 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.
Further, the subsidy levels could be dynamic with different slabs reflecting the previous year’s consumption.

Conclusion

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.

Source: TH

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