Pradhan mantri ujjwala yojana (PMUY): a critical analysis and policy recommendations

Abstract

This report critically analyses the Pradhan Mantri Ujjwala Yojana (PMUY) and provides policy recommendations to increase the effectiveness of the scheme to achieve the end goals of promoting cleaner fuels for cooking to reduce air pollution and reduce health issues faced due to the use of fossil fuels in cooking. Firstly, the report analyses the two views on policy, government & central agencies claiming the scheme to be successful and policy experts & media claiming the scheme to be ineffective in achieving the goal of increasing the use of clean fuel in cooking to reduce pollution. From this, it was identified that though the scheme was highly successful in increasing the LPG connection penetration in the countries, including poor and rural households, it was unsuccessful in motivating these households to use LPG in cooking continuously. Significant evidence was presented in various reports about the possibility of poor households shifting back again to fossil fuels due to various issues. This report also analyses the historical LPG scenario in India under various governments, focusing on developments post-2000. Here, developments in key factors like volume of LPG subsidized, eligibility criteria for claiming subsidies, amount of subsidy etc., were studied to understand key factors that drive the changes in subsidies. It was evident that an increase in LPG prices, a rise in middle-class income, a rapid increase in LPG penetration, and the political environment were the major factors in phasing out subsidies. In the last few years, the subsidies have been eliminated, considering the increased penetration of LPG. But the real issue is low LPG refills by PMUY beneficiaries, which have been reducing. From the research, the unaffordability of LPG refill cylinders due to rising prices, liquidity issues with poor households, accessibility issues in rural areas & lack of awareness were the major factors creating roadblocks in achieving targets. In the final part of the project, LPG-related initiatives and LPG subsidy mechanisms in various developing countries were studied. After comparing them with the PMUY scheme in India, few improvement opportunities have been identified. Finally, this report makes some policy recommendations to improve the LPG scenario in India, especially in bottom-of-pyramid families in India. The reports suggest restarting the LPG refill subsidies with a focus on poor households. A combination of volumetric and categorical targeting with robust indicators to identify poor households would be the best path for India. Here, the Ministry of Petroleum and Natural Gas could take the help of OMCs, other ministries, poverty experts, and state government bodies to collect robust data and develop a mechanism to provide subsidies to the poor and deserving. Further, the solutions like collaborating with third-party financers like MFIs and SHGs to provide liquidity for LPG, advance payments to OMCs, slowing down of loan amortization for the poor, LPG awareness programs, and digital innovations to improve distribution in rural areas were suggested. The government could implement these recommendations to achieve the final aim of a full shift to cleaner fuel for cooking and reducing air pollution by minimizing air pollution & its health hazards.