LPG ADOPTION BY RURAL HOUSEHOLDS: Financial Instrument to Push Refills
Energy Future|January - March 2021
One of the major health hazards in India stems from household air pollution. The use of the traditional cooking stove, called chulha, involves burning of biomass, thereby releasing smoke that is a leading cause of illness and death. In this article, Debajit Palit, Martand Shardul, and Deborshi Brahmachari discuss the advantages of replacing biomass stoves with LPG and recommend an innovative financial instrument for increasing the uptake of LPG refills by rural households
Debajit Palit, Martand Shardul, and Deborshi

This winter, like others, the air quality range in the Delhi–NCR region has oscillated between being poor and severe. Given the criticality, this time, the Central Government formed a Commission for Air Quality Management to check the menace of air pollution (MoEFCC 2020). As in previous years, in 2020 too, one of the major causes of peak pollution during winter in the Delhi–NCR region was stubble burning in Punjab and Haryana.

Stubble burning, however, is seasonal. The other major causes, such as vehicular pollution, construction dust, and pollution from industries, contribute to poor air quality throughout the year. Another major contributor to air pollution levels across North India, which is not talked about as much, is biomass burning for cooking in rural households (Chowdhury, Chafe, Pillarisetti, et al. 2019). Traditional cookstoves (chulhas) that use solid biomass as fuels increase direct exposure to household air pollution (HAP). According to World Health

Organization (WHO), roughly 30% of the ambient air pollution in India is attributable to HAP, thereby impacting both rural and urban homes (WHO 2016). A simulation-based study by IIT Kanpur observed that, on average, 17% reduction in PM2.5 is possible across India if all biomass stoves are replaced with liquefied petroleum gas (LPG) stoves (Sharma 2020). The positive externality of LPG use in areas such as climate change mitigation, public health, and gender is also well documented. For instance, with the reduction in HAP, life expectancy in India could be increased by 0.7 years (Balakrishnan, Dey, Gupta, et al. 2019). Owing to the potential of Pradhan Mantri Ujjwala Yojana (PMUY) to cut toxic emissions, it can also be regarded as a pollution abatement and public health initiative and millions of premature deaths could be averted (Tripathi and Sagar 2019). A conservative estimate for health benefit stands at INR 69,000 per non-LPG household (as per WHO CHOICE method).

Pradhan Mantri Ujjwala Yojana

With a historically slow rate of LPG connections for cooking, the Government of India launched the Pradhan Mantri Ujjwala Yojana (PMUY) in May 2016 to facilitate underprivileged households’ access to LPG (Cabinet Committee on Economic Affairs 2019). The scheme, aimed to empower women and safeguard their and their children’s health, was launched based on a 2015 Government of India-commissioned study, which identified high upfront costs and high refill costs as the main barriers for the non-adoption of LPG over biomass in Indian households (CRISIL 2016). Under PMUY, the Central Government provided a subsidy of ₹1600 to state-owned fuel retailers for every LPG gas connection (₹1450 security towards one cylinder and ₹150 was security towards regulator). The balance amount towards stove, installation charges, and first LPG refill that each household paid was to be adjusted against future subsidy disbursements for refills. By fully subsidizing new connections, India has successfully increased the penetration of LPG in rural areas from 56% in 2015 to over 97% now (MoPNG 2020). PMUY can be lauded for its unique approach, design, and implementation, having covered over 80 million underprivileged consumers across 715 districts in India.

While the achievement is commendable, PMUY faces several impediments that are affecting significant adoption of LPG cylinders in rural areas, despite the high rate of connections. These include, among others, affordability of refills, cultural or behavioural beliefs, and issues with supply chain and access. The public sector oil marketing companies (OMCs) are constantly striving to overcome these challenges. For example, the OMCs have provided LPG access using both 14.2-kg and 5-kg LPG cylinders for domestic use. This was done to address affordability concerns and transportation-related issues in hilly areas. While some practitioners and researchers opine that 5-kg cylinders could help in boosting both LPG consumption and refills among poor households (Harish, et al. 2019), this will only help in addressing affordability related concerns of a household in a limited way (by distributing the expenditure over a period of time depending on usage pattern) rather than the annual expenditure on LPG, considering the net price per kg of LPG (with subsidy) remains the same for a 5-kg or a 14.2-kg refill. Thus, the annual expenditure on LPG by a household is less likely to vary between a 5-kg cylinder and a 14.2-kg cylinder. A 5-kg cylinder may, however, help the LPG distributors improve the ease of supply to remote areas following a hub-and-spoke model.

Affordability – A Challenge towards LPG Adoption

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