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Questions remain over success of LPG scheme

Hindustan Times, New Delhi | By
Aug 26, 2020 12:25 PM IST

The PMUY scheme was aimed at achieving a shift from polluting to cleaner methods of cooking. It has overshot its target of giving 80 million free LPG connections.

Poor targeting, or benefits reaching undeserving recipients, has been among the most common criticisms of welfare programmes in India. The adoption of JAM (Jan Dhan-Aadhaar-Mobile) trinity was supposed to get rid of this problem. An HT analysis of unit level data from a 2018 National Statistical Office (NSO) survey shows that at least one of the government’s flagship welfare schemes, the Pradhan Mantri Ujjwala Yojana (PMUY), has successfully addressed the challenge — and excluded undeserving beneficiaries.

A man pushes a cart filled with liquefied petroleum gas (LPG) cylinders on a street painted with circles in Mumbai.(REUTERS)
A man pushes a cart filled with liquefied petroleum gas (LPG) cylinders on a street painted with circles in Mumbai.(REUTERS)

However, this has not helped the scheme in achieving its end objective, which is to get households to shift to less polluting methods of cooking. The reason, ironical as it may sound, is to be found in the scheme’s successful identification of beneficiaries. A large number of them are so poor that they cannot afford to buy liquified petroleum gas (LPG) cylinder refills. The experience of PMUY offers potential insights into what the next level of welfare challenges — in this case, for instance, the state may have to incur recurring expenses rather than one-time transfers.

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The PMUY scheme was aimed at achieving a shift from polluting to cleaner methods of cooking. It has overshot its target of giving 80 million free LPG connections. Data from the petroleum ministry shows that as on April 1, 2020, there were 80.2 million PMUY connections in India. The data also shows that in the last four years, PMUY connections account for 71% of growth in total domestic LPG connections in the country. (See Chart 1)

 

Also read: Prime Minister Modi’s LPG scheme for poor running out of gas

This success however has not helped the PMUY achieve its stated goal. A unit level analysis of data from the 76th round of the 76th round of the National Sample Survey conducted by the National Statistical Office (NSO) across more than 100,000 households in 2018 shows that 43% of PMUY beneficiaries were not using LPG for cooking. (See Chart 2)

 

The share of beneficiaries not using LPG for cooking increases down the economic ladder. The fact that almost 70% of PMUY beneficiaries are from the bottom 40% of the households, shows the scheme has been remarkably successful in reaching poor households. (See Chart 3)

 

How difficult can it be for the poor to buy an LPG refill? According to a December 2019 audit report by the Comptroller and Auditor General (CAG) of India on PMUY, the market price of LPG refills (14.2 kg cylinders) varied between 500 and 837 during the period from April 2016 to December 2018 in India’s four metro cities. The 2018 NSO survey findings show that the average monthly per capita expenditure (MPCE) of the poorest 20% households in India was 1,065. This means a cylinder refill costing 500 would comprise nearly half of a household’s MPCE. The same refill would comprise only about a tenth of the average MPCE of the richest 20% households (5,543). The cost of a non-subsidised LPG cylinder in Delhi is 594 right now. Even though PMUY and subsidised LPG consumers receive a subsidy on refill, they have to make the full payment upfront before the subsidy amount is transferred back to them. The high cost of gas refills, the CAG report said, has become a constraint in ensuring sustained usage of LPG.

Also read | LPG cylinders still unaffordable for poor: CAG

To be sure, beneficiaries under the PMUY scheme could also opt for a 5 kg cylinder in place of a routine 14.2 kg cylinder. The government also allowed swapping the bigger cylinder with the smaller one to make it easier for consumers to get a refill. But the CAG audit found that till December 2018, only 16,032 connections with 5 kg cylinder were released and oil companies were able to convert nearly 76,000 connections from bigger to smaller cylinders, totalling about 92,000 connections which was a meagre 0.24% of the PMUY connections. The audit report said insufficient steps were taken to encourage consumption of the 5 kg cylinder.

In order to ensure 100% LPG coverage in India – not only by the number of households covered but also by the number of households actually using it – it is important to make it easier for the country’s poor to buy a refill. This will require spending more on LPG subsidies. The government in March this year announced three free refills for the scheme’s 80 million beneficiaries to cope with the economic pain of the Covid-19 lockdown. Data on refills during this period will indicate how beneficial this was in increasing LPG usage in the country.

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