Abstract
This article analyses the performance and limitations of the Pradhan Mantri Ujjwala Yojana (PMUY), a central scheme launched in the year 2016 for the provision of liquefied petroleum gas (LPG) connections to Below Poverty Line households in the country. It shows that the scheme offered more than 80 million LPG connections and contributed to a sharp replacement of traditional fuel (firewood, kerosene, dung cake, etc.) between the years 2014 and 2018. However, a large share of these new consumers appears to have stopped LPG consumption soon after the distribution under the scheme. This is clearly evident in the huge number of inactive LPG connections which continue to increase—from 35.8 million inactive connections in the country in 2017 to 43.2 million in 2019. Though PMUY contributed to the increase in LPG connections, it failed to accelerate its consumption demand among the beneficiaries. Nearly ₹128 billion has been spent by the government in form of subsidies and around 70% of the PMUY beneficiaries have availed loans from Oil Manufacturing Companies (OMCs). If the LPG consumption fails to accelerate, these one-time subsidies provided by the government will fail to achieve the objective and the loans disbursed by the OMCs may turn into non-performing assets.
Introduction
Hazards of using unclean cooking fuel, especially for the women and children, in the form of health and employment have been documented widely (Mishra et al., 2002, 2005; Seidu et al., 2019). To overcome this, Government of India launched Pradhan Mantri Ujjwala Yojana (PMUY) in 2016 for providing liquefied petroleum gas (LPG) connections to below poverty line (BPL) households. The budget for the financial year (FY) 2019–2020 allocated nearly 2% of the total social sector expenditure on PMUY. 1 Budget for the FY 2020–2021 further allocated ₹11,180 million for PMUY. Thus, PMUY is a key pro-poor initiative towards increasing access to clean energy for the beneficiary households, thus having a direct impact on energy deprivation. Official website of PMUY tells us three core benefits of this scheme: (a) it is to safeguard the health of Women and Children by providing them clean cooking fuel as the smoke inhaled by women from unclean fuel is equivalent to 400 cigarettes in an hour and 10 crore households are deprived of clean sources of cooking energy; (b) it will generate additional employment for around 0.1 million people in the manufacturing of cylinders, gas stoves, regulators and gas hose; (c) it will benefit the Indian industry by at least ₹100,000 million over the next 3 years.
The scheme initially aimed to distribute 50 million LPG connections to BPL families as the poor segment of the population had sparse access to LPG for cooking. The revised guidelines of the scheme mentioned that the scheme to be implemented over the course of 5-year duration starting from 2016–2017 to 2020–2021 across the country with a revised target to distribute 80 million LPG connections by 2020. Consequently, more than 80 million LPG connections have been distributed under the scheme.
Before the launch of PMUY, around 80% rural households used traditional fuels 2 for cooking which sharply declined to 50% in 2018. PMUY encouraged rural households to replace traditional fuel by LPG, thus helped to mitigate the adverse effect of indoor air pollution (IAP) on health. Sustainability of this change for longer duration in rural India needs to be examined. In this context, this article estimates cooking fuels pattern pre- and post-PMUY and critically examines the feasibility of achieving goals intended by PMUY sustainably from the rural households’ perspective.
Given this backdrop, this article is organised into five sections. The section “Data Source” explains the data sources used in the study and the section “Patterns of Household Energy Consumption for Cooking Purposes in Rural India” examines the rural households’ cooking fuel use patterns pre- and post-PMUY along with the free firewood accessibility. The section “LPG Sales and Customer Growth” examines the LPG sales, customers’ growth and trend of inactive and active LPG domestic customers since the launch of PMUY. The last section concludes the article.
Data Source
This article is based on larger secondary data and information available in the public domain. This article uses 68th National Sample Survey Organization (NSSO) “Consumption & Expenditure Survey” (2011–2012) (68th round), 71st “Social Health Expenditure Survey” (2014) (71st round) and 76th “Drinking Water, Sanitation, Hygiene and Housing Condition in India Survey” (76th round) data collected by Ministry of Statistics and Program Implementation (MoSPI). This article also uses the data of Petroleum Planning and Analysis Cell (PPAC), which reports the LPG connections released under PMUY and classified the active and inactive LPG connections.
NSSO defines a household as “a group of persons normally living together and taking food from a common kitchen”. NSSO covers 28 states and seven union territories and also captures the household information irrespective of age, education and occupation of the head of the household. NSSO in these surveys follows a stratified sampling design and this survey asked participating households about the primary source of cooking in the last 30 days. In this study, cooking fuel types are categorised into traditional and clean fuels. Traditional fuel comprises the use of firewood, kerosene, coal, charcoal and cow dung, and modern fuel includes the use of LPG as a primary source of cooking. LPG access trends are tabulated by household types and monthly per capita expenditure deciles for rural India. This gives an idea of how different income groups have changed their preferences towards LPG over time.
Patterns of Household Energy Consumption for Cooking Purposes in Rural India
In relation to the issues of affordability and accessibility to various sources of cooking fuels, there are two important hypotheses widely tested in literature namely energy ladder hypothesis and stacking hypothesis. The energy ladder hypothesis states that traditional fuels and technologies are mostly to be found on lower rungs of the income ladder; with an increase in incomes, households adopt modern fuels and technologies as “partial or imperfect substitutes” for traditional sources (Elias & Victor, 2005; Hosier & Jeffrey, 1987; Kroon et al., 2013). However, the “stacking hypothesis”, has an opposing view. It states that there is simultaneity in use of traditional and modern sources, as poorer households grow richer they continue to use a mix of traditional fuels such as firewood etc. along with the available modern sources of energy. This strategy is often driven by traditional preferences, specific uses or cultural habits (Bhattacharyya, 2006; Farsi et al., 2005), irregularity of income or access, price fluctuations, etc. (Kroon et al., 2013). Another view suggests that fuel prices no longer remain constraints after a threshold income and households prefer cleaner energy sources (Reddy & Nathan, 2013).
Table 1 shows households’ primary source of cooking as reported by them in the data. Households’ primary source of cooking data for 2014 computed from 71st round and that for 2018 computed from 76th round survey. Around 79% of the rural households were dependent on traditional fuel sources for cooking in 2014, which sharply declined to 50% in 2018. The dependence upon LPG is increasing over time and its reach is to 41% of the rural households. The break-up of the fuel use across consumption deciles also tells a similar story as even more than 38% of the topmost deciles’ households still use traditional fuel as the primary source of cooking. As we descend to lower deciles, the number of households using traditional fuel goes up. Up to bottom five deciles more than 50% rural households bank upon traditional fuel for cooking. Persistence of traditional fuel usage for cooking in rural areas could be due to inadequate supply and lack of affordability of modern fuels and easy availability of traditional fuels. But after the launch of PMUY, there has not been availability problem anymore in the rural areas. This clearly indicates either lack of affordability for LPG or preference for other cooking fuel by the rural households.
Rural Household’s Primary Source of Cooking: Pre- and Post-PMUY
Free Firewood Access
Preference for firewood as a cooking fuel in rural areas, despite an increase in income, needs to be pondered. Here, it is important to understand that the source of firewood is either agricultural residues or the trees in the villages or forests at the village peripheries. Though human efforts may be involved in the collection, fuel from these sources is available either at free of cost or at a very low price. Further, there is no other alternative less hazardous and more efficient use of biomass fuel. This is important to consider as biomass is being produced either naturally (forests) or as a by-product of an important economic activity (agriculture). Further, the work participation rate of females is quite low in India. The women who are out of labour force are usually involved with the household work. So, these women have usually ample amount of time to cook food using inefficient cheaply available traditional fuel. The health hazards involved with this activity are those which usually recognised and affect in the long run due to the lack of good health facilities. 3 The hazards that occur in the short run are very similar to the seasonal diseases, so it makes them difficult to single these out due to the fuel use. In addition to this the majority of neighbourhood functions in a similar fashion which makes it further difficult to single out the hazards as comparisons are not available. So, it can be stated safely that preference for traditional cooking fuel by the rural households is facilitated by lack of affordability of LPG, free or very cheap availability of biomass fuel, the presence of household members who can devote themselves to the collection of free fuel and women having time to engage in inefficient time-consuming cooking using traditional fuel due to the lack of alternative work.
At this juncture, it is important to look at freely available firewood to the households as it also poses a hurdle in switching to other energy sources especially if they are to be purchased. SEA followed by AL has the highest free access to firewood while the “others” have the steepest rise. SEA and AL fulfil nearly 64% and 55% firewood needs by using free firewood respectively while “other” type of households purchase more than 50% of their firewood requirement (Table 2). The high rate of free firewood access to the households could be attributed to the increasing rate of urbanisation as the new rural lands which are coming under the definition of urbanisation may have attributes of rural India of access to free firewood. This indicates that the families having free firewood access may have switched to other fuel types such as LPG due to, generating a surplus to be sold in the market, and those using it are mostly dependent on the market. This can be considered as evidence that there is a preference for the traditional fuel in rural areas. Thus, the use of firewood for cooking is more prevalent in rural areas due to the easy, cheap and free availability of firewood is the main reason which deters households from switching to LPG.
Freely Accessed or Homegrown Firewood at Rural India
LPG Sales and Customer Growth
After the implementation of PMUY, LPG connections increased rapidly in the rural areas, but it remains a matter of concern that how many beneficiary households will continue refilling. The increase in LPG connections should be accompanied by an increase in LPG cylinder refills for the sustained switch to LPG as cooking fuel. Therefore, to evaluate the performance of PMUY, it would be significant to empirically examine the growth of LPG connections for domestic use along with the pattern of LPG refills of such cylinders will be indicative of the number of active and inactive LPG domestic connections. The LPG consumption grew by 9.64% and 6.80% in the year 2016–2017 and 2018–2019, respectively. On the other hand, there were 234.6 million LPG domestic customers in 2016–2017 which increased to 308.6 million in 2018–2019 at the average annual growth of 15.23% (Figure 1). PPAC data reveals that till April 2017, there were 35.8 million inactive connections in the country which increased to 38.8 million by April 2018 and further increased to 43.2 million by April 2019. However, LPG domestic customers refilling have been declining over the period. At the inception of PMUY on an average, the refilling rate was 7.7 per year which declined to 6.8 in 2017–2018 (Figure 2). While almost one third PMUY beneficiaries do not refill any single time and another one third PMUY beneficiaries do refill less than three times. Only 45% of PMUY beneficiaries do refill more than four times (Ghosh, 2020). This indicates that although PMUY has rapidly increased the LPG connections but failed to accelerate its consumption demand among the beneficiaries at the same pace. Till 1 October 2019, more than 80 million LPG connections have been released under PMUY. If 50% PMUY beneficiaries do refill less than three times in a year which clearly affect the overall refilling rate. The declining refilling rate especially by PMUY beneficiaries significantly contributes to the rising rate of inactive LPG customers in the rural areas.
PMUY offers 14.2 kg LPG cylinder and 5 kg LPG cylinder connections to the households. Further, the scheme provides financial support of ₹1,600 for each cooking gas connection to eligible households for any of two types of connections. Letter of Ministry of Petroleum and Natural Gas dated 28 June 2016 classified the different costs involved for availing PMUY connection for both 14.2 kg LPG and 5 kg LPG cylinder (Table 3). Total cost
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for 14.2 kg and 5 kg LPG cylinder is ₹3117 and ₹1689, respectively. Thus, for availing 14.2 kg and 5k g LPG cylinder, they have to spend ₹1517 and ₹89, respectively, from their own pockets. For this extra money, households either take a loan or arrange by owns. There is also a provision of financial support if households take a loan. The government gives ₹94 and ₹43 as subsidy on the loan amount for 14.2 kg and 5 kg LPG cylinder, respectively. Households will have the option not to take a loan or take a part loan. Ultimately, households have to arrange ₹1423 and ₹46 for 14.2 kg and 5 kg LPG cylinder, respectively. In the application form of PMUY it is clearly mentioned that:
I hereby declare that I have applied for Domestic LPG connection under PMUY and cannot afford to buy the LPG stove and refill, hence a loan on EMI basis is requested by me on LPG stove/first refill/both. LPG stove/first refill is purchased on loan from OMC, I authorize my OMC to recover the loan amount from the subsidy of the refills availed by me. I am fully aware that I will not receive the subsidy amount of refills purchase by me in my bank account till the time loan amount is fully recovered by the OMC.
Details of Budgetary Support for PMUY Connection
For a household of five members, 5 kg LPG cylinder will be inadequate to cater their monthly energy requirements if it chooses to primarily use LPG as cooking fuel. Thus, such households will require 14.2 kg LPG cylinder for meeting its energy requirements. If households opt 14.2 kg LPG cylinder under PMUY they have to arrange at least fourteen hundred rupees and if they take a loan from the government they will not get subsidised LPG after sixth LPG refilling (Utpal Bhaskar, 25 March 2018, Live Mint) until the loan amount is recovered. This signifies that onwards seventh LPG refilling they have to refill at a market price for the next few refills. In addition to this, the price of non-subsidised LPG has been continuously rising. The price of non-subsidised LPG cylinder (14.2 kg) was ₹575 in Delhi in September 2019 and it reached at ₹859 in February 2020. The poor households will find it difficult to afford non-subsidised LPG at such high rates. Thus, the requirement to purchase non-subsidised LPG in order to loan repayment and to avail further subsidy will definitely discourage the poor households from refilling. As a result of this entire process, releasing LPG connections under PMUY are less likely to achieve the intended goal of promoting LPG as the primary fuel for rural households. If the connections go inactive after utilising the subsidised refills (i.e., first six refills) will create non-performing assets (NPA) for Oil Manufacturing Companies (OMCs) who are to recover loans through collecting LPG subsidy on refills (seventh onward). Our estimates show that nearly 54% of the PMUY beneficiaries get less than four refills.
Conclusion
In rural areas, there has been the sharp replacement of traditional fuel by LPG during the period of 2014 to 2018. But this shift to LPG must be sustainable for rural households. The results show that LPG consumption grew by 9.64% and 6.80% during the years 2016–2017 and 2018–2019, respectively. There were 234.6 million LPG Domestic Customers in 2016–2017 which rise by an average annual growth of 15.23% to reach 308.6 million by 2018–2019. Till April 2017 there were 35.8 million inactive connections in the country which increased to 38.8 million by April 2018 and further increased to 43.2 million by April 2019. This indicates that PMUY has increased the LPG connections but failed to accelerate its consumption demand among the beneficiaries.
This article also highlights that a significant number of rural households have free firewood access. Firewood is either a by-product of agriculture, a major occupation in the rural areas, or it is available from the trees in the villages or forests at the peripheries of the village. Despite being human effort involved, all these sources are available either at free of cost or at a very low price in comparison to the modern fuels for a household. Since there is the free availability of traditional fuel (firewood) in rural areas and the shift to LPG is taking a long time, the dilemma is whether to try to replace the traditional fuel with the modern fuel or try to utilise traditional fuel for cooking with more efficiency and in a less hazardous manner.
This article shows that the energy policy has to be linked with the larger economic and labour market dynamics in the rural economy. If the poor households are dependent on their marginal holdings and precarious and vulnerable employment for their earnings then the replacement of the traditional energy with modern energy is going to be limited. The households will enjoy the modern fuel till no investment is required and then switch back to traditional fuel. If this remains the case, and PMUY beneficiaries do not get more than six refills, OMCs are bound to face a huge creation of NPAs in their account books. Huge sums spent by the government in form of subsidies will also go in vain accumulating as a fiscal burden for no specific outcomes.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research, authorship and/or publication of this article.