The 'blue flame' revolution

week, kindly suspend all domestic LPG supply to this gas agency”.

This is an excerpt from a letter written by an LPG sales officer of an oil marketing company (OMC) about a gas agency in Uttar Pradesh’s Rampur in October 2016. The letter, written just five months after the ambitious Pradhan Mantri Ujjwala Yojana (PMUY) scheme was launched at Balia in May 2016, reflected the “perform or perish” diktat that Narendra Modi attached to his “blue flame revolution,” to transform the lives of millions of housewives in rural India.

In a country where the best plans trip on implementation, this hard-line approach has worked. Liquefied petroleum gas (LPG) penetration increased from 62 per cent in 2016 to 90 per cent now, PMUY accounting for almost half this increment. As on January 18, the plan to distribute free cooking gas connections to poor households via distributors of state-owned OMCs — Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (BPCL) — covered 61.2 million consumers in 715 districts.

LPG connections were initially provided to women in Below Poverty Line (BPL) families with a support of Rs 1,600 per connection for the stove and first refill; in December 2018, its ambit was expanded to “all-poor,” which means those who do not fall within various government-identified lists. Under this, IOC alone has extended Rs 3,125 crore as loans that allow beneficiaries to repay based on their convenience till the next six refills, of which Rs 955 crore has been repaid

The scheme owes it success to the daily monitoring by petroleum minister Dharmendra Pradhan and officials at joint secretary and director level, an OMC official confirms. He recalled the example of a norther district nodal officers’ meet in Lucknow last year. “The minister named each of 200-odd officials by name and, much to our surprise, we learnt that he used to make phone calls to them to boost their morale. Such minor things helped PMUY,” he said.

The importance of good implementation can be seen in the contrasting performance of a version of the scheme under prime minister Manmohan Singh’s United Progressive Alliance (UPA). Indeed, the idea of subsidising cooking gas for poor rural households was mooted during the UPA’s second stint. Labelled the Rajiv Gandhi Gramin LPG Vitaran (RGGLV) scheme, it was launched in 2009.  

This scheme was discontinued by the National Democratic Alliance for almost a year before it re-emerged as PMUY. The erstwhile scheme also focused on mobilising distribution through dealer networks but in five years only 4,000 new domestic cooking gas distributors were added. Over the past four years, the number of LPG distributors increased 60.6 per cent from 13,896 in March 2014 to 22,328 in November 2018 (all of them servicing PMUY).

Still, PMUY faces its challenges. Ironically, usage frequency is one of them. The average refill by a PMUY consumer is 3.28 cylinders a year against seven by a normal consumer. Affordability is one factor, since a cylinder costs Rs 689, even touching Rs 942.5 in November 2018.

Responding to a query on Twitter, Ashutosh Jindal, joint secretary-marketing, in the petroleum ministry, said, “Refills are an issue for some poor households which we are trying to address through 5 kg refills and by setting up points of delivery.” This enables PMUY beneficiaries to swap a standard 14.2 kg cylinder with a 5 kg refill. As on December 31, 2018, less than one per cent of the PMUY beneficiaries had availed of this option. 

“The intensity of demand and affrdability in rural India is expected to be low. Getting the LPG-use mindset and supply chain in place will take months and years,” Deepak Mahurkar, partner and leader — oil & gas industry — PwC India, pointed out.

Jindal says complete conversion to LPG as a cooking fuel has socio-economic and behavioural dimensions. “Some alternative fuels like cow dung, firewood may be completely free of cost for a rural household. It will take time for a family to appreciate that what seems to be free has other costs like health impact, time lost, which could have been used for productive livelihood,” he said.

OMCs’ efficiency in LPG distribution is also an issue, because greater penetration increased pressure on LPG bottling plants. The 190 bottling plants in the country now run at over 120 per cent capacity utilisation. The slow pace in getting clearances for bottling units is adding to the problems.

To tackle the issue, companies are planning to set up 60 such units across the country at an investment of Rs 400 crore. "The sector also needs reforms to bring in supply chain efficiency to reduce the costs that are passed on to consumers. Public sector companies have the strength to make the fuel reach remote and far-flung areas.  The private sector can bring in efficiency to distribution channel as also leverage capital efficiency. Accordingly, policy should be designed to now decontrol the sector,” Mahurkar suggested.

Whatever the glitches going forward, PMUY is one scheme for which this government can unambiguously claim credit as a controversy-ridden poll season begins.

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