Insights into Editorial: LPG for every Indian household

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Insights into Editorial: LPG for every Indian household

23 March 2016

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The Cabinet Committee on Economic Affairs, chaired by the Prime Minister, recently approved Pradhan Mantri Ujjwala Yojana. The scheme is being implemented by the Ministry of Petroleum and Natural Gas.

Aim of the scheme: It aims at Providing Free LPG connections to Women from BPL Households.

Details:

  • The scheme aims to provide 5 crore subsidized LPG connections to women of poor households (BPL).
  • Under the scheme, Rs 8000 crore has been earmarked for providing five crore LPG connections to BPL households. This Scheme would be implemented over three years, namely, the FY 2016-17, 2017-18 and 2018-19.
  • The Scheme provides a financial support of Rs 1600 for each LPG connection to the BPL households.
  • The identification of eligible BPL families will be made in consultation with the State Governments and the Union Territories.

What makes LPG adoption necessary?

  • Various surveys have indicated that the poor in the country have limited access to cooking gas (LPG). Also, the spread of LPG cylinders has been predominantly in the urban and semi-urban areas with the coverage mostly in middle class and affluent households.
  • There are serious health hazards associated with cooking based on fossil fuels. According to WHO estimates, about 5 lakh deaths in India alone due to unclean cooking fuels. Most of these premature deaths were due to non-communicable diseases such as heart disease, stroke, chronic obstructive pulmonary disease and lung cancer.
  • Indoor air pollution is also responsible for a significant number of acute respiratory illnesses in young children. According to experts, having an open fire in the kitchen is like burning 400 cigarettes an hour.
  • Also, women and younger children are most affected by indoor pollution caused by biomass as they spend maximum time at home. Nearly 82% of pregnant women in rural India are exposed to biomass related indoor air pollution, which increases the risk of low birth weight.
  • Hence, providing LPG connections to BPL households will ensure universal coverage of cooking gas in the country. This measure will empower women and protect their health. It will reduce drudgery and the time spent on cooking. It will also provide employment for rural youth in the supply chain of cooking gas.

Major barriers to LPG adoption in India and associated issues:

  1. High LPG prices: According to a survey, as many as 95% of LPG-deprived households in India cited their inability to pay as a barrier to their adopting LPG. Expenditure capacity of poorer households in India is very low.
  2. Limited LPG distribution networks in rural areas in the next major barrier.
  3. Awareness and administrative issues is the third major barrier. About 40% of LPG-deprived households in rural areas cite a lack of information about the process of getting a connection as a challenge.

How can we address these issues?

  • Create awareness about the actual cost of fuel and its benefits, especially those related to health.
  • Tackle 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.
  • Leverage 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.
  • 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). Hence, 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.
  • 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.
  • Those relying completely on free-of-cost biomass (about 50-60% 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. So, awareness creation in rural areas and among the urban poor is also a must.
  • Also, the high recurring cost, as cited by poor households, in LPG purchases is not only a problem of purchasing capacity but also a perception and cash-flow issue. Various studies suggest 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.

Conclusion:

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.