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Energy Safety Nets: India Case Study

Sasmita Patnaik, Shaily Jha, Karishma Pradhan, Abhishek Jain
February 2020 | Energy Access

Suggested citation: Council on Energy, Environment and Water. 2020. Energy Safety Nets: India Case Study. Vienna: Sustainable Energy for All.

Overview

This study is first-of-its-kind research to inform best practices at the intersection of energy policy and social assistance to protect very poor, vulnerable and marginalised people. A part of the the Energy Safety Nets research series, it was undertaken in partnership with Sustainable Energy for All (SEforALL), Overseas Development Institute (ODI) and the Catholic Agency for Overseas Development (CAFOD). Energy Safety Net is an umbrella term for government-led approaches to support very poor and vulnerable people to access essential modern energy services. The approach helps in closing the affordability gap between market prices and what poor customers can pay. The series and the accompanying Guide for Policymakers synthesises lessons from six country case studies from Brazil, Ghana, India, Indonesia, Kenya and Mexico, to offer recommendations for the future design of Energy Safety Nets.

The India case study focuses on four major schemes within the ambit of LPG Programme: Pratyash Hanstantrit Labh (PaHaL) or the Direct Benefit Transfer of LPG Subsidy (DBTL), ‘Give it Up’ Campaign, Pradhan Mantri Ujjwala Yojana (PMUY), and Unified Guidelines for Selection of LPG distributorships.

Key Highlights

  • As of September 2019, 80 million families had received a subsidised connection under the PMUY. TheDBTL had blocked 42.3 million duplicate, fake/non-existent, and inactive LPG connections from receiving the subsidy by March 2019. Despite this, concerns remain with respect to affordability for the poorest households, availability of the fuel at the doorstep, and awareness around calculation and disbursement of subsidies among new users.
  • Although about 10 million households surrendered their subsidy voluntarily through the Give it Up campaign, 90 percent of India’s non-poor population still receive the LPG subsidy. It leaves limited resources for the additional subsidy for the poorest households.
  • Improved targeting and rationalisation of use-based subsidies could help to concentrate the subsidy on the poorest households.
  • Using the Socio-Economic Caste Census (SECC) for defining deprivation means drawing on data obtained in 2011 and overlooking the dynamic nature of poverty.
  • Support for the regular use of LPG could be enhanced by leveraging the existing social assistance schemes - 1) by integrating social assistance programmes for the poorest, thereby reducing the administrative burden on households and the government, and 2) linking the identification and targeting methods across existing social assistance programmes to provide a differential subsidy, i.e., enhanced support for the poorest households and most-deprived households.

Integration and linking across existing social assistance schemes for improving access to LPG

Source: Author’s analysis

Key Recommendations

  • Introduce a tiered subsidy mechanism to reflect that poorer households need greater support than the middle class to use LPG regularly. Increase the subsidy for households that have been provided LPG connections under the PMUY. Use a combination of socio-economic factors to identify those in need of reduced subsidy or no subsidy at all.
  • Conduct consistent and sustained awareness campaigns, such as LPG Panchayats, and include primary decision makers in households alongside LPG users to educate consumers about the disbursement of LPG subsidy.
  • Provide additional incentives per refill to small distributors in rural and remote areas to account for the higher transportation cost, lower customer density and lower refills rates compared to the urban areas.
  • Link delivery of differential subsidy for LPG use with the existing social assistance schemes for maternal and child health, nutrition, and livelihoods.
Nearly 90 per cent of India’s non-poor population still receive the LPG subsidy, leaving limited resources for the additional subsidy for the poorest households.

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