What’s the news?

• For the first time, LPG consumption in Indian households saw an absolute reduction in 2023 (minus 0.5% versus FY22) after years of steady growth.

Central idea

• Over the past 15 years, the Government of India has endeavored to replicate the urban success of LPG adoption in rural and poorer households. The Grameen Vitrak Yojana and Pradhan Mantri Ujjwala Yojana (PMUY) have significantly expanded the rural distributor base from 18% to 60%. However, the recent decline in LPG consumption raised questions about its sustainability and highlighted the need for a transition.

Significant growth in the LPG sector

• Share Increase: The share of Indian households using LPG as their primary cooking fuel rose from 33% in 2011 to 71% in 2020, according to the India Residential Energy Consumption Survey (IRES) conducted by the Council on Energy, Environment, and Water (CEEW).
• Pradhan Mantri Ujjwala Yojana (PMUY): The successful implementation of PMUY, launched in May 2016, played a pivotal role in promoting LPG adoption. Over 8 crore (80 million) free LPG connections were provided to women from Below Poverty Line (BPL) households by March 2021.
• Reduction of Health and Environmental Hazards: The increased adoption of LPG has led to a reduction in health hazards caused by traditional cooking fuels like firewood, crop residues, and dung cakes. Indoor air pollution, particularly affecting women who spent long hours cooking in smoky kitchens, has decreased.
• Government Initiatives: Government policies and initiatives aimed at promoting clean cooking solutions have contributed to the growing awareness among Indian households about the benefits of LPG as a clean fuel for cooking

Challenges faced by the LPG sector

• Financial Barriers: The withdrawal of LPG subsidies for all consumers during the COVID-19 pandemic in 2020 created financial barriers for many households, affecting their ability to afford LPG refills.
• Underutilization of Subsidies: Despite providing three free cylinders to all PMUY consumers in FY21 as part of the Pradhan Mantri Garib Kalyan Yojana, only 14.1 crore out of the possible 24 crore free cylinders were consumed, indicating challenges in reaching the intended beneficiaries and ensuring full utilization of the provided benefits.
• Distribution and Logistics: Despite significant efforts, home delivery and distribution channel issues persisted, particularly affecting non-PMUY consumers, leading to slow refill rates and hindering the seamless supply of LPG.
• Price Volatility: Indian households have experienced a near-doubling in LPG prices since May 2020 in nominal terms due to volatile international prices, especially since the Russian war against Ukraine. This price volatility affects the affordability and accessibility of LPG for consumers.
• Import Dependency: India’s dependence on imported LPG (the refined commodity) has steadily increased to over 64% in FY23, compared to 46% in the pre-PMUY phase. This import dependency exposes the country to international market risks and supply disruptions.
• Budgetary Constraints: Given the domestic budget’s reliance on petroleum taxation and uncertain international prices, it is unlikely that India can return to a regime where a subsidy of approximately INR 20,000 crore (2011–12 prices) was provided each year for LPG consumption over the first two decades of the 21st century.

Steps and a data-driven approach for India’s clean cooking transition

• Promote Electric Cooking: India should actively promote electric cooking, including induction cook-tops, to offset the reliance on flame-based cooking. The IRES conducted by CEEW showed that even at a high tariff of ₹8 per unit of electricity, electric cooking remains cheaper than LPG cooking at current prices.
• Leverage Electricity Access in Rural Areas: With near-universal access to electricity connections in rural areas, specific cooking needs can be shifted to electricity. This approach can effectively reduce the reliance on LPG in rural households.
• Incentivize Transition to Electric Cooking: Policymakers can use a telescopically increasing LPG prices beyond a threshold, such as seven cylinders per average household.
• Support Domestic Manufacturing Ecosystem: Demand from early adopters of electric cooking can spur the domestic manufacturing ecosystem for electric cooking technologies.
• Monetize Avoided Emissions: By transitioning from traditional chulhas to electric cooking, India can avoid climate pollutant release. This can be monetized through the newly launched carbon market, providing financial resources to support the adoption of electric cooking by poorer rural communities.
• Shift the Policy Focus: Policymakers need to move beyond LPG subsidies alone and focus on fostering a bouquet of solutions for India’s clean cooking goals.

Conclusion

• While LPG subsidies have played a crucial role in improving adoption, it is time for India’s clean cooking policy to diversify and embrace a range of clean-cooking technologies. By nurturing a bouquet of clean cooking solutions, India can pave the way for a sustainable and healthier future.

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