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HowtoTarget

LPGSubsidies

inIndia:

Step2.Evaluatingpolicy

optionsinJharkhand

GSIREPORT

ShrutiSharmaTomMoerenhoutMichaëlAklinKavyaBajaj

©2021InternationalInstituteforSustainableDevelopment|

IISD.org

/gsi May2021

HowtoTargetLPGSubsidiesinIndia

©2021InternationalInstituteforSustainableDevelopmentPublishedbytheInternationalInstituteforSustainableDevelopment

Thispublicationislicensedundera

CreativeCommonsAttribution-

NonCommercial-ShareAlike4.0InternationalLicense

.

InternationalInstituteforSustainableDevelopment

TheInternationalInstituteforSustainableDevelopment(IISD)isanaward-winningindependentthinktankworkingtoacceleratesolutionsforastableclimate,sustainableresourcemanagement,andfaireconomies.Ourworkinspiresbetterdecisionsandsparksmeaningfulactiontohelppeopleandtheplanetthrive.Weshinealightonwhatcanbeachievedwhengovernments,businesses,non-profits,andcommunitiescometogether.IISD’sstaffofmorethan120people,plusover150associatesandconsultants,comefromacrosstheglobeandfrommanydisciplines.Ourworkaffectslivesinnearly100countries.

IISDisaregisteredcharitableorganizationinCanadaandhas501(c)(3)statusintheUnitedStates.IISDreceivescoreoperatingsupportfromtheProvinceofManitobaandprojectfundingfromgovernmentsinsideandoutsideCanada,UnitedNationsagencies,foundations,theprivatesector,andindividuals.

HeadOffice

111LombardAvenue,

Suite325

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CanadaR3B0T4

Tel:+1(204)958-7700

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Twitter:@IISD_news

GlobalSubsidiesInitiative

TheIISDGlobalSubsidiesInitiative(GSI)supportsinternationalprocesses,nationalgovernmentsandcivilsocietyorganizationstoalignsubsidieswithsustainabledevelopment.GSIdoesthisbypromotingtransparencyonthenatureandsizeofsubsidies;evaluatingtheeconomic,socialandenvironmentalimpactsofsubsidies;and,wherenecessary,advisingonhowinefficientandwastefulsubsidiescanbestbereformed.GSIisheadquarteredinGeneva,Switzerland,andworkswithpartnerslocatedaroundtheworld.ItsprincipalfundershaveincludedthegovernmentsofDenmark,Finland,NewZealand,Norway,Sweden,SwitzerlandandtheUnitedKingdom,aswellastheKRFoundation.

HowtoTargetLPGSubsidiesinIndia:

Step2.EvaluatingpolicyoptionsinJharkhandMay2021

WrittenbyShrutiSharma,TomMoerenhout,MichaëlAklin,andKavyaBajaj

GlobalSubsidiesInitiative

InternationalEnvironmentHouse2,

7–9chemindeBalexert1219ChâtelaineGeneva,SwitzerlandCanadaR3B0T4

Tel:+1(204)958-7700

Website:

/gsi

Twitter:

@globalsubsidies

IISD.org/gsi ii

HowtoTargetLPGSubsidiesinIndia

Acknowledgements

Theauthorswouldliketothankanumberofindividualswhocontributedtothisproject,including:onprojectdesign,ChristopherBeatonfromtheInternationalInstituteforSustainableDevelopmentandJohannesUrpelainenfromtheInitiativeforSustainableEnergyPolicy(ISEP),JohnsHopkinsUniversity;ondatacollection,VagishaNandanfromISEPandBhartenduTrivedi,NitinRathour,GauravPravin,andtherestoftheteamatMorselIndia.

Theauthorsofthisupdatewouldliketothankthefollowingindividualsandinstitutionsforthevaluablecommentsandrecommendationsthattheyprovidedaspeerreviewers:

AjayPillarisettiandCarlosF.Gould,InitiativeforSustainableEnergyPolicy(ISEP)

MadhuraJoshi,NaturalResourcesDefenceCouncil(NRDC)

SunilMani,CouncilforEnergy,EnvironmentandWater(CEEW)

ChandrashekharSingh,IntegratedResearchandActionforDevelopment(IRADe)

RobBailis,StockholmEnvironmentInstitute(SEI)

WewouldalsoliketothankthegovernmentsofSweden,Norway,andDenmarkfortheirgeneroussupportofthiswork.

Theopinionsexpressedandtheargumentsemployedinthispaperdonotnecessarilyreflectthoseofthepeerreviewersandfunders,norshouldtheybeattributedtothem.

IISD.org/gsi iii

HowtoTargetLPGSubsidiesinIndia

ExecutiveSummary

WhyExploreLiquefiedPetroleumGasSubsidyTargeting?

Infiscalyear(FY)2019,India’ssubsidiesforliquefiedpetroleumgas(LPG),acleanercookingfuel,amountedtoINR54,518crore(USD7.74billion).LPGsubsidiesareexpensiveandcreatefiscalpressureatatimewhenitsrevenuesarefallingbecauseofCOVID-19.Throughconnectionsupport,consumptionsupport,andlowertaxation,theyhaveplayedanimportantroleinthemassiveuptakeofLPG.Theaimofthispolicyhasbeentoshifthouseholdsawayfromtraditionalbiomassfuelsthatreleasedangerousamountsofindoorairpollution,causingrespiratorydisease,particularlyamongwomenandchildren.

InMay2020,thedramaticdeclineinworldoilpricesresultedinalargedecreaseinLPGcylinderprices,effectivelyremovinganyLPGsubsidypercylinder.Sincethen,bothoilpricesandLPGcylinderpriceshaveclimbedupwardsagain,withpricesreachingpre-COVIDlevels.Asofthetimeofwriting,therehasbeennoclarityonwhethertheLPGsubsidywillbereintroduced,butitisanticipatedthatdemandfortheirreturncanonlygrow.TheCOVID-19crisishasseverelyaffectedincomes,furtherstressingtheneedtoprovidesupportforaffordablecleancookingforthemostvulnerable.Thisreportdiscussesthepotentialfor“subsidytargeting”:suggestingthatanyreintroductionofLPGsubsidiesshouldfocusbenefitsonthosemostinneedwhilereducingthemforbetter-offconsumers.

FigureES1.Distributionoftotalsubsidies(in%)byruralandurbanexpenditurequintiles

Changeinshare(%)

35

32

30

30

24

25

19

20

21

20

17

15

15

11

12

10

5

0

1

2

3

4

5

Expenditurequintile

Rural

Urban

Note:Thedistributionofbenefitsaboveisillustratedacross“quintiles”orderedbyrelativeexpenditurelevels.Quintile1ismadeupofthepooresthouseholdsandquintile5,thewealthiesthouseholds.Asimilarregressivedistributionisobservedwhenquintilesaredefinedusingawealthindex(ascoreforhouseholdsbasedonnon-electricassetsandsocio-economicstatus).Seethefullreportforresultsbrokendownbydifferentmethodsforidentifyingpoorerandricherhouseholds.

IISD.org/gsi iv

HowtoTargetLPGSubsidiesinIndia

OurApproach

Thisreportseekstopromoteadiscussionontargetingusingrobustsurveydatafromover900householdsinJharkhandonLPGconsumption,householdexpenditure,andassets.Weassess:(1)thedistributionofexistingLPGsubsidiesand(2)theperformanceofdifferenttargetingstrategies.

DistributionofExistingLPGSubsidies

LPGsubsidiesareregulatedbythenationalgovernment,withthesubsidyvaryingwithmonthlyrevisionsinLPGcylinderprices.WefoundthatthedistributionofLPGsubsidiesisregressiveinJharkhand,namely:

Amongruralhouseholds,thetoptwoquintiles—therichest40%ofhouseholds—receive53%ofsubsidybenefits,andthebottomtwoquintilesreceive28%.

Amongurbanhouseholds,thetoptwoquintilesreceive54%ofsubsidybenefits,andthebottomtwoquintilesreceive27%.

HowCouldLPGSubsidyTargetingBeImproved?

Weevaluatedtwostrategiestoimprovesubsidytargeting,resultinginthefollowingchangesinsubsidydistribution.

TableES1.SummaryofapproachestoimproveLPGsubsidytargeting

Option

Description

Results

Volumetric

Thistargetingoptionreducesthe

Thisdidnotimpactthedistribution

targeting

annualquotaofasubsidizedcylinder

ofLPGsubsidies,anditcontinuedto

from12to9foreachLPGconsumer.

beregressive:better-offhouseholds

receivedahighershareofsubsidy

benefits,whilepoorerhouseholds

receivedasmallershare.Butthis

optionreducedsubsidyexpenditure,as

itreducedsubsidytransfersby14%in

ruralareasandby19%inurbanareas.

Differential

Thistargetingoptionallocates

Thisincreasedtheaveragesubsidy

subsidyfor

ahigherper-cylinderPratyaksh

receivedbyallgroupsbutalsomade

Pradhan

HanstantritLabhYojana(PAHAL)

nosignificantchangetosubsidy

Mantri

subsidyonlyforbeneficiariesof

incidence.Inruralareas,therichest

Ujjwala

PMUY,suchthatthefirstsetofthree

40%nowreceived52%ofbenefits

Yojana

cylindersconsumedannuallyisata

comparedto53%earlier.Thepoorest

(PMUY)

90%subsidizedrate,thesecondset

40%sawsubsidybenefitsfallto27%

consumers

isata60%subsidizedrate,andthe

from28%earlier.Similarresultswere

thirdsetisata30%subsidizedrate,

observedamongurbanhouseholds.It

withconsumerspayingmarketrates

shouldbenoted,however,thatthese

aftertheirninethrefill.Non-PMUY

estimatesassumednochangein

usersreceiveaflat30%subsidyon

consumptionpatternsasaresultof

ninecylindersannuallyandmarket

highersubsidies.

ratesaftertheirninethrefill.

IISD.org/gsi

v

HowtoTargetLPGSubsidiesinIndia

Recommendations

Thisreporthastestedandanalyzedseveraloptionsbutdidnotidentifya“magicbullet”foreasilyimprovingLPGsubsidydistributionamongpoorhouseholds.ThemainbottleneckinimprovingsubsidydistributionappearstobethelowconsumptionofsubsidizedLPGcylindersamongpoorhouseholdsandthehighconsumptionamongbetter-offhouseholds.Subsidiesthereforeaccumulatetobetter-offhouseholdswithhigherconsumptionofsubsidizedLPGcylinders.Untilreasonsforlowconsumptionbypoorhouseholdsarebetterunderstoodandaddressed,andaneffectivewayisfoundtorestrictbenefitsforbetter-offconsumers,policy-makerscanconsiderapplyingvolumetrictargetingtocontinuetolimitoverallsubsidyexpenditure.

SincetheCOVID-19crisisbegan,manyhouseholdsinIndiahaveseenadramaticfallinincomesandareanticipatedtofallbackintopoverty.CoupledwithJharkhand’sexistinghighlevelsofpoverty,thisstronglysuggeststhatthechoiceofanynewtargetingmechanismwhenLPGsubsidiesarereintroducedmustbeundertakenwithcaretonotincreasethehardshipsforanypoorhouseholds.

ThisreportmakesthefollowingrecommendationstoimprovesubsidytargetingwhenthegovernmentreintroducesanLPGsubsidy.

Maptheknowledgegap:ThisstudydemonstratesthatLPGsubsidiesarehighlyregressiveinJharkhand.AdedicatedeffortisneededtoidentifytheequityofLPGsubsidiesacrossIndiainordertobetterconcentratepolicyattentiononthisproblem.

Testsmarterindicators:Povertyiscontextual,andthisreporttestedinterventionsforJharkhand,astatewithhighpoverty.Manyoftheapproachestestedheremayyielddifferentresultsforotherstates.Furtherworkcouldalsobedonetocontinuethisstudy’stentativeexplorationofindicators,likemotorcycleownership,thatcouldbeusedtorestrictsubsidiestohigher-incomehouseholds.Otheroptionsincludegeographicaltargeting(basedonaphysicalareawithahigherpercentageofvulnerablehouseholds)orsocialcategoricaltargeting(wherehouseholdsqualifyiftheyarebeneficiariesofexistingsocialwelfareschemes).LeveragingbothnationalandJharkhand-levelwomen-centricschemescouldalsoexploredasawaytoimplementpossiblecategoricaltargeting.

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HowtoTargetLPGSubsidiesinIndia

TableofContents

1.0WhyLPGSubsidiesandTheirTargetingMatter 1

2.0BackgroundofLPGSubsidiesinIndia 3

2.1LPGSubsidyPoliciesinIndia 3

2.2COVID-19’sImpactonLPGSubsidies 5

2.3GenderandWelfareSchemesinJharkhand 6

3.0Methodology 7

3.1SurveyDesign 7

3.2ApproachforEstimatingLPGSubsidyBenefits 8

3.3ApproachesforCategorizingHouseholds 9

3.3.1RationCardApproach 9

3.3.2ExpenditureApproach 10

3.3.3WealthIndexApproach 11

3.4ComparingtheApproaches 12

4.0WhoGetsLPGSubsidiesToday,andIstheDistributionofBenefitsFair? 15

4.1SubsidyIncidenceWithaRationCardApproach 15

4.2ViaanExpenditureQuintileApproach 18

4.3ViaaWealthQuintileApproach 20

4.4LPGAccessandAffordability 22

5.0HowWouldDifferentTargetingOptionsChangeSubsidyDistribution? 25

5.1VolumetricTargeting:Reducingannualvolumetriclimitsfrom12to9 25

5.2DifferentialSubsidyforPMUY:Increasingper-cylindersubsidyforPMUYconsumers 29

5.3ImplicationsofResults 34

6.0ConclusionsandRecommendations 36

6.1Conclusions 36

6.2Recommendations 37

References 39

AnnexA.EstimatingMonthlyLPGSubsidy 43

AnnexB.WealthIndex 44

AnnexC.SupportingFigures 46

IISD.org/gsi vii

HowtoTargetLPGSubsidiesinIndia

ListofFigures

FigureES1.Distributionoftotalsubsidies(in%)byruralandurbanexpenditurequintiles v

Figure1.Surveydesign 8

Figure2.Surveyedhouseholdsdisaggregatedbytypeofrationcard 10

Figure3.Rationcardownershipbyexpenditurequintiles 13

Figure4.Rationcardownershipbyruralwealthquintiles 14

Figure5.Rationcardownershipbyurbanwealthquintiles 14

Figure6.Rationcardownershipinruralareas 15

Figure7.Rationcardownershipinurbanareas 16

Figure8.Annualconsumptionofcylindersbyrationcardholdersinruralareas 16

Figure9.Annualconsumptionofcylindersbyrationcardholdersinurbanareas 16

Figure10.MeanLPGsubsidybyrationcardinruralareas 17

Figure11.MeanLPGsubsidybyrationcardinurbanareas 17

Figure12.Share(%)ofLPGsubsidiesreceivedbyrationcardholdersinruralareas 18

Figure13.Share(%)ofLPGsubsidiesreceivedbyrationcardholdersinurbanareas 18

Figure14.Annualconsumptionofcylindersbyexpenditurequintileinruralareas 19

Figure16.MeanLPGsubsidybyexpenditurequintileinruralareas 19

Figure15.Annualconsumptionofcylindersbyexpenditurequintileinurbanareas 19

Figure17.MeanLPGsubsidybyexpenditurequintileinurbanareas 19

Figure18.Share(%)ofLPGsubsidiesreceivedbyexpenditurequintileinruralareas 20

Figure19.Share(%)ofLPGsubsidiesreceivedbyexpenditurequintileinurbanareas 20

Figure20.Annualconsumptionofcylindersbywealthquintileinruralareas 20

Figure21.Annualconsumptionofcylindersbywealthquintileinurbanareas 20

Figure22.MeanLPGsubsidybywealthquintileinruralareas 21

Figure23.MeanLPGsubsidybywealthquintileinurbanareas 21

Figure24.Share(%)ofLPGsubsidiesreceivedbywealthquintileinruralareas 22

Figure25.Share(%)ofLPGsubsidiesreceivedbywealthquintileinurbanareas 22

Figure26.LPGexpenditureasshare(%)ofhouseholdexpenditureinruralareas,by

expenditurequintile 23

Figure27.LPGexpenditureasshare(%)ofhouseholdexpenditureinurbanareas,by

expenditurequintile 23

Figure28.Share(%)ofhouseholdsusingprimarycookingfuelinruralareas,by

expenditurequintile 24

Figure29.Share(%)ofhouseholdsusingprimarycookingfuelinurbanareas,by

expenditurequintile 24

Figure30.Changeinshare(%)ofLPGsubsidiesreceivedbyexpenditurequintilein

ruralareasfromvolumetrictargeting 26

IISD.org/gsi viii

HowtoTargetLPGSubsidiesinIndia

Figure31.Changeinshare(%)ofLPGsubsidiesreceivedbyexpenditurequintileinurban

areasfromvolumetrictargeting 27

Figure32.ChangesinmeanLPGsubsidy(INR)receivedbyexpenditurequintilesin

ruralareasfromvolumetrictargeting 27

Figure33.ChangesinmeanLPGsubsidy(INR)receivedbyexpenditurequintilesin

urbanareasfromvolumetrictargeting 28

Figure34.%breakdownofannualLPGcylinderconsumptioninexpenditurequintiles

forruralareas 28

Figure35.%breakdownofannualLPGcylinderconsumptioninexpenditurequintilesfor

urbanareas 29

Figure36.Changeinshare(%)ofLPGsubsidiesreceivedbyexpenditurequintilein

ruralareasfromdifferentialsubsidy 30

Figure37.Changeinshare(%)ofLPGsubsidiesreceivedbyexpenditurequintilein

urbanareasfromdifferentialsubsidy 31

Figure38.ChangesinmeanLPGsubsidy(INR)receivedbyexpenditurequintilesin

ruralareasfromdifferentialsubsidy 31

Figure39.ChangesinmeanLPGsubsidy(INR)receivedbyexpenditurequintilesin

urbanareasfromdifferentialsubsidy 32

Figure40.%breakdownofannualLPGcylinderconsumptioninexpenditurequintilesfor

PMUYconsumersinruralareas 32

Figure41.%breakdownofannualLPGcylinderconsumptioninexpenditurequintilesfor

PMUYconsumersinurbanareas 33

Figure42.%breakdownofhouseholdsbytypeofLPGconnectioninvariousrural

expenditurequintiles 33

Figure43.%breakdownofhouseholdsbytypeofLPGconnectioninvariousurban

expenditurequintiles 34

FigureC1.%breakdownofannualLPGcylinderconsumptioninexpenditurequintiles

forruralareas 46

FigureC2.%breakdownofannualLPGcylinderconsumptioninexpenditurequintilesfor

urbanareas 46

IISD.org/gsi ix

HowtoTargetLPGSubsidiesinIndia

ListofTables

TableES1.SummaryofapproachestoimproveLPGsubsidytargeting vi

Table1.India’sLPGsubsidies(INRmillion) 4

Table2.HouseholdswithLPGconnectionsinthesurvey 8

Table3.Rangeofhouseholdmonthlyexpenditureranges,byquintiles(INR) 11

Table4.Inter-quintileranges:Householdmonthlyexpenditurerangesforthewealth

indexindifferentruralandurbanquintiles(INR) 12

Table5.Summaryofmainfindings 36

Table6.SummaryoftargetingoptionstoimproveLPGsubsidytargetinginJharkhand 37

TableA1.MonthlymarketpricesandsubsidyforLPGcylindersfromMay2019toMarch2020.43

TableB1.Listofvariablesusedintheconstructionofthewealthindex 44

ListofBoxes

Box1.Chi-squaretestingandstatisticalsignificance 13

Box2.Furtherpossibilitiestoexplore:Indicatorstofilteroutbetter-offconsumers 35

IISD.org/gsi x

HowtoTargetLPGSubsidiesinIndia

AcronymsandAbbreviations

AAY

APL

BPL

DBT

DBTL

FY

LPG

MoPNG

MGNREGA

NREG

NSAP

OMC

PAHAL

PDS

PH

PIB

PMUY

PMGKY

PMJDY

PMKisan

PMMVY

SHG

SECC

AnantodayaAnnaYojana

AbovePovertyLine

BelowPovertyLine

DirectBenefitTransfer

DirectBenefitTransferforLPG

fiscalyear

liquefiedpetroleumga

MinistryofPetroleumandNaturalGas

MahatmaGandhiNationalRuralEmploymentGuaranteeAct

nationalruralemploymentguarantee

NationalSocialAssistanceProgramme

oilmarketingcompany

PratyakshHanstantritLabhYojana

PublicDistributionSystem

PriorityHousehold

PressInformationBureau

PradhanMantriUjjwalaYojana

PradhanMantriGaribKalyanYojana

PradhanMantriJan-DhanYojana

PradhanMantriKisanSammanNidhi

PradhanMantriMatruVandanaYojana

self-helpgroup

Socio-EconomicCasteCensus

IISD.org/gsi xi

HowtoTargetLPGSubsidiesinIndia

1.0WhyLPGSubsidiesandTheirTargetingMatter

Energysubsidiescanplayanimportantroleintacklingthe“affordability”barriertoenergyaccess.TheIndianCentralGovernmentsubsidizesliquefiedpetroleumgas(LPG),inpart,tohelphouseholdstransitionawayfromtraditionalsolidfuels,whichareresponsibleforhighlevelsofhouseholdairpollutionthatprimarilyaffectswomenandyoungchildren.

ThesepolicieshavebeenextremelysuccessfulinincreasingLPGconsumption.Inrecentyears,however,theircosthasgrownconsiderably,whichmaymakethemhardtosustain.Infiscalyear(FY)2019,LPGsubsidiesaddeduptoINR54,518crore(USD7.74billion),28%ofallnationalenergysubsidies(Gargetal.,2020).1ThisisalmostthreetimesthevalueinFY2017(Gargetal.,2020).In2020,thesubsidieswillhavetemporarilyfallentoverylowlevelsduetotheworldoilpricecrashamidtheCOVID-19pandemicandthetemporaryhaltingofLPGsubsidiessinceMay2020.Butthisisanexceptionalchange,andcostsmayclimbagainastheworldeconomyandoilpricesrecoverandifLPGsubsidiesarereintroduced.

Despitethefiscalburden,thereisgrowingdemandforLPGsubsidies.Accordingtoa2018surveyofruralhouseholdsinIndia’ssixmostenergy-deprivedstates,over60%ofrespondentswantedhigherLPGsubsidiesoverothercleancookinginterventions,upfrom47%in2015(Jainetal.,2018).Similarly,70%ofhouseholdsalreadyusingLPGastheirprimaryfuelthoughtitwastooexpensive,comparedto57%in2015(Jainetal.,2018).InFY2016,activeLPGdomesticconsumersstoodat148.6million.AsofFY2020,thishadgrown87%to278.7million.

Subsidy“targeting”isoneoptionthatcanmaintainLPGsubsidiesforpoorconsumerswhilereducingoverallprogramcosts:thatis,focusingsubsidybenefitsonanarrowersubsetofbeneficiaries.Buttherearebigknowledgegapsstandinginthewayofitseffectiveimplementation.Thereisnoup-to-datepubliclyavailablenationaldistributiondataontheeffectivenessandefficiencyofIndia’sLPGsubsidies.

ThisreportaimstofillthegapfortimelyandcomprehensiveanalysesonsubsidydistributionandeffectivenesstosupportanypolicyredesignwhenLPGsubsidiesarereintroduced.Basedonahouseholdsurveyconductedin2019inJharkhand,weanalyzethedistributionofLPGsubsidiesamonghouseholdsofdifferentwealthlevels.Wethenanalyzeseveraloptionsforimprovingsubsidytargeting.ThesemeasureshavebeenshortlistedfromalargersetoftargetinginterventionsidentifiedinIISD’spreviouswork,includingSharma,Jainetal.(2019).

ThisreportisthefourthinaseriesthatexamineshowenergysubsidiescanbebettertargetedinIndia,including:

HowtoTargetElectricityandLPGSubsidiesinIndia:Step1.IdentifyingPolicyOptions

1Exchangeratesinthisreportforrespectivefinancialyearsaretakenfrom

/conversion/

exchange-rates.htm

IISD.org/gsi 1

HowtoTargetLPGSubsidiesinIndia

HowtoTargetResidentialElectricitySubsidiesinIndia:Step2.EvaluatingPolicyOptionsin

theStateofJharkhand

UnpackingIndia’sElectricitySubsidies:Reporting,Transparency,andEfficacy

Themethodologyusedinthisreporttotrackthedistributionofsubsidybenefitsisthesameastheonethathasbeenusedinpreviousstudiesonelectricitysubsidies.

IISD.org/gsi 2

HowtoTargetLPGSubsidiesinIndia

2.0BackgroundofLPGSubsidiesinIndia

2.1LPGSubsidyPoliciesinIndia

IndiaprovidessubsidiesforLPGconsumptionandconnectionsthroughthePratyakshHanstantritLabhYojana(PAHAL)andPradhanMantriUjjwalaYojana(PMUY)schemes,respectively.Itsobjectiveistohelphouseholdstransitionawayfromtraditionalsolidcookingfuels,whichareresponsibleforhighlevelsofindoorairpollutionthatprimarilyaffectswomenandyoungchildren.

ThePAHALscheme(alsoknownastheDirectBenefitTransferforLPG[DBTL])wasintroducedin2014.ItaimstoreduceillegalconnectionsanddiversionofsubsidizedLPGcylindersbyrequiringconsumerstobuyLPGatthemarketprice,onlyafterwardstransferringsubsidiesdirectlyintopeople’sbankaccounts(MinistryofPetroleumandNaturalGas[MoPNG],2020e).SubsidizedLPGissoldas14.2-kgor5-kgcylindersthroughdistributorsforthreenationaloilmarketingcompanies(OMCs).TopurchasesubsidizedLPG,householdsmustenrolthemselvesintheregistrybelongingtotheOMCthatservicestheirareausingaformofpersonalidentification(initially,Aadharcards)registeredtoahouseholdmemberandmeettheeligibilitycriteriaofanannualhouseholdincomeoflessthanINR10lakh(USD13,494).

Whenitwasfirstintroduced,PAHALseemedtosucceedinreducingillegalconnectionsanddiversionbecausethenumberofbeneficiariesfell.Uponcloserexamination,however,itsimpactsweremoreambiguous,asmanypoorhouseholdsweresimplyunabletoregisterduetotheAadharmechanismandotherbarrierstoregistration(Jainetal.,2016).

ThePMUYschemewaslaunchedundertheMoPNGin2016.Itsinitialgoalwastoprovide5crore(50million)LPGconnectionstopoorhouseholdsatasubsidyofINR1,600(USD21.59)perconnectionoverthreeyears(MoPNG,2016).Underthepolicy,a“connection”referredtoalltheup-frontcostsofstartingtouseLPG:afirstLPGcylinder(whichcouldsubsequentlybeswappedforrefillsunderPAHAL),anLPGstove,andassociatedequipment.Thepolicycoveredaroundhalfofthecosts.Householdscouldeitherpaytheotherhalfthemselvesortakealoan,whichwouldbeservicedbyforegoingPAHALsubsidiesuntilitwasrepaid.

AdistinguishingfeatureofPMUYwasitsintegrationofgenderconsiderations:itissuedLPGconnectionsonlyinthenamesofwomenfrompoorhouseholds(MoPNG,2020f).In2018,thegovernmentachieveditstargetfornewconnectionsandrevisedthe2019targetupwardto80millionLPGconnections(Sharma,Singhetal.,2019).BySeptember2019,itreportedhavingachievedthistarget(MoPNG,2020f).InFebruary2021,thegovernmentannounceditwasextendingPMUYtoanother1crore(10million)consumers(MinistryofFinance,2021).

DespitethesuccessofPMUYinhelpinghouseholdsuseLPGforthefirsttime,thenumberofhouseholdscitinghighcostsandhighmonthlyexpensesasbarrierstoLPGuseremainedhigh,at92%in2018(Jainetal.,2018).Mediareportingsuggestedthat,inparticular,households

IISD.org/gsi 3

HowtoTargetLPGSubsidiesinIndia

werestrugglingtoaffordthecostofLPGconsumptionbecausetheINR1,600inassistanceunderPMUYhadtobepaidbackbyforegoingpartialPAHALsubsidiesininstalmentsonLPGrefills(Sanghera,2019;Sharmaetal.,2019b;Yadavar,2019).DataonfuelconsumptionshowedthatmanyhouseholdshadbeguntouseLPGbuthadnottransitionedawayfromtraditi