Recalibrating India’s Clean Cooking Strategy

Why in News?

• For the first time, LPG consumption in Indian households saw an absolute reduction in FY23 (minus 0.5% versus FY22) after years of steady growth.
• Now, the questions are how long India must consider subsidising LPG to improve adoption and what are the other options that it can explore.

 

The LPG Story

• Over the last 15 years, the Government of India has attempted to replicate the success of liquefied petroleum gas (LPG) in urban households, in poorer and rural households.
• The Grameen Vitrak Yojana, launched in 2009, has helped grow the rural distributor base from 18% to 60% of the total LPG distributor base today.
• The Pradhan Mantri Ujjwala Yojana (PMUY) has provided more than 9.5 crore new households with LPG connections since 2016.
• With near-universal coverage of LPG, this is nothing short of an administrative and operational miracle.
• In the recent past, the share of Indian households using LPG as the primary cooking fuel had risen to 71% in 2020 from 33% in 2011, according to the India Residential Energy Consumption Survey (IRES) conducted by the Council on Energy, Environment and Water (CEEW).
• It was a clear indication that Indian households wanted to adopt clean cooking solutions, and policy could overcome ‘preferences and financial barriers.’

 

Government’s Clean Cooking Policies

• PMUY/ Pradhan Mantri Ujjwala Yojana
  • This scheme, launched in 2016, has been instrumental in increasing the shift from traditional fuels to LPG.
  • Under PMUY Phase I, 8 crore women from poor households received deposit-free LPG connections in 2019.
  • Under PMUY Phase II, the beneficiaries received a stove and free first refill, in addition to depositing free LPG connections.
  • Over the years, several attempts have been made to increase LPG consumption under this scheme, including
    • A subsidy of Rs 200/ 14.2 kg refill
    • Up to 12 refills/ year
    • 5 kg DBC (Double Bottle Connection) option
    • Swap option from 14.2 kg to 5 kg
    • Up to 3 free refills/ beneficiary under PM Garib Kalyan Package in 2020
• Surya Nutan
  • It is a solar cooking stove developed by IOCL (Indian Oil Corporation Limited) and the Union Ministry of Petroleum and Natural Gas.
  • This stationary, rechargeable indoor cooking platform was launched in June 2022 to reduce the burden on gas.
  • It works in different modes, making it a reliable solution irrespective of the weather.
  • The first one isOnlinewhich directly uses solar energy and the second is Hybridthat uses both- solar energy and an auxiliary energy source.

 

Challenges Faced by India’s Clean Cooking Policies

• Global Events: Global events that unfolded since the COVID-19 pandemic and the Russian invasion of Ukraine and the resulting surge and volatility in crude and product prices have dented even a near-term prospect of universal use of LPG in Indian households.
• Dependency on Import: Another challenge is that India’s dependence on imported LPG — the refined commodity has steadily increased to over 64% in FY23 (versus 46% in the pre-PMUY phase). 
• Near Doubling of LPG Prices
  • Indian households have seen a near-doubling in LPG prices since May 2020 in nominal terms.
  • With volatile international prices and a domestic budget that relies on petroleum taxation significantly, it is unlikely that India can return to a regime where a subsidy of approx INR20,000 crore (between 2000-2020) was provided each year for LPG consumption.
• Less Refill Rates
  • In 2020, with the onset of COVID-19, subsidy for LPG consumption was withdrawn for all consumers.
  • Then, in FY21, three free cylinders were provided to all PMUY consumers as part of the Pradhan Mantri Garib Kalyan Yojana.
  • This droves the annual refill rates for LPG among PMUY consumers to their highest levels of 4.55 cylinders per active connection (from three to four cylinders in other years).
  • However, of the possible 24 crore free cylinders available for the taking, only 14.1 crore were actually consumed.
  • Further, a nominal subsidy of ₹200 per cylinder was reinstated for PMUY consumers in September 2022, and it helped improve refill rates in FY23 (4.09) versus FY22 (3.68).
  • Average refill rates for active non-PMUY consumers are in slow decline — 40% of PMUY consumers choose to get two or less refills in a year now.
  • These outcomes suggest that despite significant efforts, home delivery and distribution channel issues remain and more budgetary outlay will be needed for subsidies to encourage the poor to consume LPG and avail its health benefits.

 

Suggestions to Diversify India’s Clean Cooking Strategy

• Shift from an LPG-only Strategy to E-Cooking
  • India’s clean cooking policy must actively move towards the adoption of a suite of clean-cooking technologies and shift from an LPG-only strategy.
  • For example, electric cooking, including induction cook-tops, can significantly offset the need for flame-based cooking.
  • A CEEW study finds that even at a high tariff of ₹8 for each unit of electricity, e-cooking would still be cheaper than cooking using LPG at today’s prices.
  • In urban areas, nearly 10% of households already use electrical appliances for their cooking needs, and they can seed the bigger transition that we want to realise in rural areas. 
  • However, there are legitimate concerns about the power distribution grid in rural India and its ability to support all-electric cooking, given the high-power needs of the extant technology.
• Increase LPG price beyond a Threshold
  • One possible mechanism to nudge the shift to e-cooking could be through increasing LPG prices beyond a threshold (say, seven cylinders that the average household consumes today).
  • This could displace LPG in higher-use groups and, in turn, create a demand for new e-cooking technologies and models, and precipitate a bandwagon effect.
• Targeted Support to Domestic Manufacturing of E-Cooking Tech
  • Demand from these early adopters can then spur the domestic manufacturing ecosystem for e-cooking technologies and stem this runaway dependence on imported LPG and crude, and the outflow of precious forex.
  • This requires targeted support in the interim for manufacturers to embrace efficiency and design for the needs of Indian households, for instance, a gas and electric cooktop in one device for a start.
  • With the newly launched carbon market, India can actually monetise these avoided emissions and help finance the capital needed by poorer rural communities to adopt e-cooking. 

 

Way Forward

• There are ways that the government could constrain overall expenditure while improving LPG access, including:
  • Restricting the total number of subsidised cylinders provided per registered connection from 12 to eight 14.2-kg cylinders per connection per annum.
  • Better targeting the LPG subsidy based on assessment of income so that it only goes to those who would otherwise be unable to afford LPG (this might include the lower-middle income groups).
• The Government can also explore diverse approaches to identify beneficiaries such as by limiting the subsidy provision to seven to eight LPG refills annually and excluding well-to-do households.
  • For instance, lowering the income-based exclusion limit for LPG subsidy or excluding families owning a non-commercial four-wheeler vehicle can significantly reduce the number of eligible beneficiaries.

 

Conclusion

• The launch of welfare schemes like PMUY and Ujjwala 2.0 show the Government’s commitment towards promoting clean cooking energy access.
• LPG subsidies have been proven a huge success. However, the debate needs to move from LPG subsidy alone to financing and business models that value India’s clean cooking transition for its climate and clean air benefits, through a bouquet of solutions.

 

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Q1) What is the Need to revisit the Gas-Pricing Formula?

Local gas prices are at a record high due to the surge in global prices because of the ongoing Russia-Ukraine conflict and are expected to rise further. Skyrocketing global natural gas prices lifting energy and industrial costs and derailing the efforts to contain inflation are raising concerns. The country has been battling inflation above the Reserve Bank of India's tolerance band of 2%-6% for seven consecutive months.

 

Q2) What is the Scenario of Gas Market in India?

Total consumption in India is 175 million standard cubic metres a day (MMSCMD). Of this 93 MMCMD is met through domestic production and 82 MMSCMD through LNG imports. Gas consumption is directly linked to supply availability. Of natural gas consumed in the country, almost 50% is imported LNG. Fertiliser sector is the largest consumer of gas, accounting for a third of the consumption, followed by city gas distribution or CGD (23%), power (13%), refineries (8%) and petrochemicals (2%).

 

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Source: The Hindu