LPG subsidy: An analysis of the ‘ Give it Up ‘ scheme

Sandarbha Desk
Sandarbha Desk
Source: Wikimedia

The ‘ Give it Up ‘ scheme

  • In recent years, a new kind of public policy tool, the ‘nudge’, has gained currency. Drawing on psychology and behavioral economics, a ‘nudge’ tool aims to guide individuals towards making choices with desirable, socially beneficial outcomes.
  • The ministry of petroleum and natural gas (MoPNG) had initiated an innovative variation of the ‘nudge’, by promoting what amounts to mass philanthropy in India — where each individual action is small, but it all adds up to a substantial outcome.
  • This is the ‘Give it Up’ scheme, which encourages well-to-do households to voluntarily give up their liquefied petroleum gas (LPG) subsidy so that it could be targeted to the poor who remain reliant on polluting cooking fuels such as wood, dung, crop residues and coal.

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  • Many Indian households have voluntarily surrendered their LPG subsidy. This scheme, therefore, helps address the thorny, yet urgent, issue of how to channel subsidies to those who need them the most.
  • It goes beyond the transfer of the subsidy from well-to-do households to below-poverty-line (BPL) households. The campaign also engages the corporate social responsibility (CSR) funds of the major oil PSUs to provide the upfront costs for the regulator and cylinder deposit. Without these, many BPL families would not be able to take advantage of the subsidy due to lack of upfront capital for this equipment.
  • This one-time grant amounts to about Rs 1,600 per BPL household — in addition to the LPG subsidy of around Rs 2,000 per household, but varies with LPG’s market price.
  • The companies are also investing in new types of distributor arrangements to solve the ‘last mile’ problem that plagues LPG distribution in rural areas.
  • In addition, some states are providing the first LPG stove, which costs typically another Rs 1,200.
  • Every consumer giving up LPG subsidy is recognized by being listed on a ‘scroll of honor’ and mapped on to the name of a corresponding BPL family receiving an LPG connection.

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  • Although there has been some skepticism about the programme, MoPNG data suggests that as many as 30,000 households have been giving up their subsidies daily.
  • Many organizations have also contributed by disseminating the message of the campaign and positively nudging their employees.
  • Interestingly, the campaign may also be one of the most significant public health campaigns in today’s India.
  • There has been an increasing recognition of the significant impact of ‘traditional’ fuel use on the health of three-fifths of Indian households, particularly on women and children.
  • The household air pollution created by these fuels is now recognized as among the top health risk factors in the country, being well above child malnutrition, unsafe water and sanitation, and smoking as causes of ill health.
  • In addition, gathering these fuels requires hundreds of hours of women’s time annually in many parts of the country.
  • Where wood is gathered unsustainably, it puts pressure on already stressed forests.
  • While there are ongoing efforts by entities such as the new and renewable energy ministry’s National Biomass Cookstoves Programme, various NGOs and private firms, the ‘Give it Up’ campaign has substantially expanded these efforts.
  • To fully understand the health impacts of the campaign — as well as of other efforts — there is a need to initiate systematic independent field measurements and assessments.

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  • Of course, much more needs to be done to ensure that the LPG subsidies are targeted to those who need them most.
  • One possibility is to link the level of subsidy directly to the income of the beneficiaries. The ministry, in 2015, took an important first step towards this by introducing a cut-off annual income level of Rs 10 lakh for availing the subsidy, with the income to be self-certified by the applicant, to reduce the paperwork burden.
  • At the same time, it also would be useful to analyze the patterns of the voluntary surrender of the LPG subsidy. A better understanding of the patterns and the factors that have contributed to this mass movement can contribute to improved policymaking in many arenas. That, indeed, would add to the legacy of the ‘ Give it Up ’ campaign and further help in meeting the country’s development challenges through a synergistic interplay of individual and government action.

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