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  1. LPG subsidy a distortion, provide fuel-agnostic cooking sop: NITI Aayog

LPG subsidy a distortion, provide fuel-agnostic cooking sop: NITI Aayog

The NITI Aayog has suggested to the Ministry of Petroleum and Natural Gas that eligible beneficiaries receiving subsidy on liquefied petroleum gas (LPG) should rather be given a 'cooking subsidy' through direct benefit transfer (DBT).

By: | New Delhi | Published: July 12, 2018 6:12 AM
LPG subsidy, NITI Aayog, LPG gas, Ministry of Petroleum and Natural Gas, cooking subsidy, direct benefit transfer, Pradhan Mantri Ujjwala Yojana The think-tank envisages that beneficiaries should be provided cooking subsidy through the DBT and the freedom to decide on the cooking fuel. (IE)

The NITI Aayog has suggested to the Ministry of Petroleum and Natural Gas that eligible beneficiaries receiving subsidy on liquefied petroleum gas (LPG) should rather be given a ‘cooking subsidy’ through direct benefit transfer (DBT). While 4.6 crore LPG connections released under the Pradhan Mantri Ujjwala Yojana (PMUY) have led to smoke-free kitchens in rural India, the NITI Aayog in a note to the ministry said the ‘subsidy’ attached to LPG is creating distortions in adopting cleaner forms of fuel. The note advocates that piped natural gas (PNG) is the most efficient form of fuel in urban areas and biogas should be the preferred option in rural areas given availability of raw materials.

The think-tank envisages that beneficiaries should be provided cooking subsidy through the DBT and the freedom to decide on the cooking fuel. As per the current practice, customers eligible for subsidy buy LPG cylinders depending on the prevailing market price and the subsidy amount is then remitted to beneficiaries’ bank accounts. However, no such subsidy is provided for fuels other than LPG and kerosene.

The note compares pricing and carbon-dioxide emissions for various forms of fuel such as biomass, biogas, PNG, LPG and kerosene. However, the response of the petroleum ministry on the suggestion by the NITI Aayog could not immediately be ascertained by FE.
Launched in May 2016, the PMUY was initially aimed at providing clean cooking fuel to 5 crore women from households classified as the below poverty line under the Socio Economic Caste Census 2011 over a period of three years. A sum of Rs 8,000 crore was allocated for the scheme to start with.

However, given the success of the scheme, finance minister Arun Jaitley announced in the latest Budget to allocate an additional Rs 4,800 crore and increased the target to 8 crore beneficiaries. The scope of the scheme has also been widened. Under the PMUY, the government bears a burden of Rs1,600 per connection and almost an equal amount is borne by beneficiaries, who either pay upfront or take a loan from the OMCs, the programme executors. The loan is repaid by beneficiaries by letting go the subsidy with each refill. However, to push the refill rate, OMCs earlier this year announced that they will defer loan recovery by six months for every existing as well as new beneficiaries.

The NITI Aayog believes that PNG will be a better option even in tier-II, tier-III and large villages and the Petroleum and Natural Gas Regulatory Board should promote the cooking fuel in these areas by allowing more number of distributors. The regulator on Tuesday received more than 400 bids for 86 geographical areas (GAs) offered in the ninth city gas distribution (CGD) licensing round. These GAs will cover 24% of the country’s area and 29% of the population. In other words, they cover 174 districts across 22 states and Union Territories.

Currently, 91 GAs with 24% of the population have piped natural gas (PNG) facility. A licence winner under the CGD round will have the exclusive right to offer PNG and CNG in a particular GA for eight years, extendable by two years. However, according to a person close to CGD licensing, PNG will not be economical for distributors in small towns and villages. “LPG and PNG will co-exist,” said the person, adding that it cannot be ruled out that cities in future will only have PNG, and LPG will primarily cater to villages.

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