Health First, Fiscal Prudence Later

The Hindu     8th March 2021     Save    
QEP Pocket Notes

Context: LPG subsidy is a critical social investment to free-up women’s productive time and reduces public health burden. To realize these goals, there is a need to balance LPG subsidies and ensure sustained clean fuel consumption in poorer households.

About Pradhan Mantri Ujjwala Yojana, PMUY

  • Since 2016, PMUY provided LPG connections to 8 million poor households
  • Helped expand LPG coverage to > 85% of households, in comparison to less than a third in 2011.
  • Offering one crore new connections under Ujjwala 2.0 in FY22.

Associated issues

  • Price rise: Subsidized LPG prices increased by 50% this financial year. There has also been a reduction in LPG subsidy by 50% in the Budget for FY22 (versus FY21)
  • Limited uptake among poor households: Survey by Council on Energy, Environment and Water (CEEW) suggest that, on average, PMUY beneficiaries consumed about half the LPG compared to regular consumers. Reasons:
    • Effective price of LPG is not affordable despite subsidy.
    • Access to freely available biomass.
  • Pollution and health concerns: Biomass use for cooking contributes to indoor air pollution and up to 30% to ambient PM2.5 (more than the contribution of transport, crop residue or coal burning)
  • Lack of transparency in the pricing of subsidized LPG: LPG prices increased during pandemic times despite plummeting international market prices of LPG.

Way Forward

  • Better targeting of subsidy:
    • Consumption pattern-based targeting: Provide households exhibiting low consumption or a decline in LPG consumption with greater subsidy per cylinder.
    • Adopting a dynamic subsidy model with different slabs reflecting the previous year’s consumption
  • De-duplication efforts: To weed out households with multiple LPG connections.
QEP Pocket Notes