Man­ag­ing Ujjwala in the times of volatile fuel prices

Business Standard - - OPINION - JY­OTI PARIKH The writer is the Ex­ec­u­tive Di­rec­tor of In­te­grated Re­search and Ac­tion for De­vel­op­ment

While petrol and diesel prices are breath­ing fire and have be­come a sub­ject of daily news, the LPG front is quiet. The price in­crease of ~15-20 per litre on trans­port fu­els over the last few months is a sub­ject of in­tense con­ver­sa­tion, but the in­crease of cylin­der prices from ~650 to ~820 (14.2 kg) is not, be­cause the in­crease is ab­sorbed fully by the cen­tral gov­ern­ment through a sub­sidy of ~320 per cylin­der. Trans­port fu­els are bring­ing wind­falls to the Cen­tre and state fi­nances as they in­clude high taxes on a per­cent­age ba­sis: the higher the im­port price, more the taxes. How­ever, LPG sub­sidy is eat­ing away these gains from the cen­tral gov­ern­ment, where 50 mil­lion ad­di­tional house­holds have been added since May 2016 through the Ujjwala scheme, an ini­tia­tive aimed to give LPG con­nec­tions to the poor with­out the con­nec­tion charge ($25). It is de­scribed by some in­ter­na­tional ex­perts as the largest tran­si­tion pro­gramme ever in the world, that en­abled women to shift to mod­ern fu­els from solid biomass viz wood, crop residues and an­i­mal dung that re­quired drudgery, hard­ship and health risks. A Na­tional Ge­o­graphic doc­u­men­tary has been made about the Ujjwala scheme.

How do we en­sure the good in­ten­tions of giv­ing af­ford­able clean fu­els to poor women while man­ag­ing sub­sidy bur­den? Ujjwala cus­tomers are poorer than the reg­u­lar

LPG (non-Ujjwala) cus­tomers. At

55.6 mil­lion, they are 20 per cent of con­sumers. Both the groups get the same amount of sub­sidy through Direct Bank Ac­count Trans­fer (DBT). In the short-term, it may be good to dis­tin­guish these two types of con­sumers. For ex­am­ple, keep­ing sub­sidy fixed at a gen­er­ous level of ~200 per cylin­der for reg­u­lar con­sumers — which also in­clude poor and mid­dle class con­sumers — can save ap­prox­i­mately ~150 bil­lion a year as we pass on the re­main­ing price in­crease. Chang­ing to fixed sub­sidy sys­tem rather than price (~500) en­sures fis­cal clar­ity.

In the long-term of say 15 to 20 years, we need to take steps to grad­u­ally move away from the cylin­der-based de­liv­ery sys­tem. The sys­tem re­quires us to im­port fuel from abroad in ships, put up pipe­lines, man­u­fac­ture a large num­ber of re­quired cylin­ders, bot­tle gas in them and trans­port them all over through trucks, tem­pos and bi­cy­cles. Ex­pand­ing port fa­cil­ity, stor­age, road space, in ad­di­tion to re­quired num­ber of dis­trib­u­tors and cylin­der may re­quire huge ad­di­tional in­vest­ments. Mil­lions of cylin­ders trans­ported all over In­dia every month can hardly be the only vi­sion or so­lu­tion of to­mor­row, given the safety risk, ex­ten­sive trans­port, con­ges­tion, en­ergy con­sump­tion and emis­sions they may cause on our al­ready crowded roads. The sub­sidy will even in­crease fur­ther if the re­cently taken cabinet de­ci­sion ap­prov­ing sec­ond phase of Ujjwala is im­ple­mented, which will add an­other 30 mil­lion house­holds by 2020. What in­cen­tives dis­trib­u­tors will need to reach sparse vil­lages and what would it cost?

A prac­ti­cal ap­proach would be a mul­ti­modal strat­egy that con­sid­ers en­ergy in var­i­ous modes and forms. For ex­am­ple, se­lected megac­i­ties and cities close to the gas pipe­line in­fra­struc­ture can be lured to piped nat­u­ral gas (PNG) for which the gov­ern­ment has al­ready started tak­ing steps. PNG is the most suit­able ur­ban so­lu­tion. Us­ing the pipe­line net­work to de­liver gas could re­duce cylin­der trans­porta­tion on con­gested roads of at least megac­i­ties. A cam­paign to pro­mote and even man­date PNG in some of the lo­cal­i­ties in the megac­i­ties will im­prove the prof­itabil­ity of the PNG de­liv­ery firms, who le­git­i­mately com­plain that their busi­ness is vi­able only if the con­sumer den­sity im­proves sig­nif­i­cantly. This cam­paign can be about cleaner, cheaper, safer and en­vi­ron­men­tally friendly cook­ing fuel al­ways at the doorstep and does not await de­liv­ery. Pri­vate in­vest­ment in the PNG sys­tem would come only with higher and prof­itable de­mand. Res­i­dent wel­fare as­so­ci­a­tions can be in­cen­tivised to have PNG con­nec­tion to make their so­ci­eties “cylin­der-free” so that the cylin­ders can be used by peo­ple away from densely pop­u­lated cities. Cur­rently, there are only 3.2 mil­lion PNG con­nec­tions with 95 per cent of them in Gu­jarat, Ma­ha­rash­tra and Delhi. How­ever, both PNG and LPG are im­ported fu­els or de­rived from im­ported fu­els to a great ex­tent.

Si­mul­ta­ne­ously, the Gov­ern­ment of In­dia also has a Saub­hagya scheme to sup­ply elec­tric­ity to all vil­lages and house­holds pos­si­bly through grid and mini grids pow­ered by lo­cally avail­able re­new­able en­ergy. Elec­tric­ity can be used for cook­ing through many ap­pli­ances rang­ing from elec­tric hot plates, in­duc­tion cook­ers, mi­crowave ovens, rice cook­ers etc. With the cur­rent ex­pan­sion and strength­en­ing of elec­tri­fi­ca­tion, elec­tric­ity is or soon will be a read­ily avail­able en­ergy source in many more houses than the LPG. No doubt, as In­dia grows, the re­li­a­bil­ity of elec­tric­ity sup­ply as well as the power con­nec­tiv­ity that pro­vides high volt­age power would have to be en­sured. That has to be done in any case to meet the elec­tric­ity de­mand be­yond ”light, fan, mo­bile charge and TV” and ex­pand to­wards pro­duc­tive uses for home-based or small in­dus­tries, agri­cul­ture and other ac­tiv­i­ties for liveli­hoods. A se­ri­ous anal­y­sis of how and where Uj­jawala can meet Saub­hagya is needed.

Re­cently, the ef­forts on re­new­able en­ergy — so­lar and wind — have been stepped up. The prime min­is­ter has also given a chal­lenge to in­tro­duce elec­tric cook­ing through so­lar pan­els. They can also con­trib­ute to the range of so­lu­tions based on elec­tric­ity whether they are con­nected with grid or through mini and mi­cro grids for clus­ters of vil­lages.

These mul­ti­ple so­lu­tions may help many other busi­nesses to flour­ish — for ex­am­ple re­new­able en­ergy through so­lar pan­els, elec­tric ap­pli­ances and piped gas — if sim­i­lar in­cen­tives are given to them. A flat sub­sidy for reg­u­lar cus­tomers will en­sure fis­cal pre­dictabil­ity and prompt con­sumers to choose long-term so­lu­tions lead­ing to re­duced fos­sil fuel de­pen­dence and sub­sidy bur­den.

PNG is the most suit­able ur­ban so­lu­tion. Us­ing the pipe­line net­work to de­liver gas could re­duce cylin­der trans­porta­tion on con­gested roads of at least megac­i­ties

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