How to Target Electricity and LPG Subsidies in India

This report by the International Institute for Sustainable Development (IISD) examines the fiscal burden and distributional efficiency of electricity and liquefied petroleum gas (LPG) subsidies in India. It identifies significant knowledge gaps due to outdated census data and proposes various targeting mechanisms—including volumetric, categorical, and income-based approaches—to ensure subsidies reach the poorest households without compromising energy access.

• In 2017, India's electricity and LPG consumption subsidies cost the government INR 87,830 crore (USD 13.1 billion).
• Electricity consumption subsidies are the largest energy subsidies in India, representing 49 per cent of all quantifiable central government energy subsidies in FY 2017/18, totaling INR 74,925 crore (USD 11.2 billion).
• The PAHAL cash transfer scheme is the largest single petroleum product subsidy in India, estimated at 9 per cent of all quantifiable central energy subsidies in FY 2017/18, amounting to INR 12,905 crore (USD 1.9 billion).
• Distributional data for energy subsidies is severely outdated, with the last comprehensive national analyses for both electricity and LPG based on the 2011 census.
• The 'Give It Up' opt-out scheme for LPG has had limited impact on targeting, with only around 5 per cent of active connections de-registered.
• The Ujjwala scheme, which focuses on connection subsidies rather than consumption, showed better clustering of benefits among the poor; a study in Chhattisgarh and Jharkhand found 48 per cent of beneficiaries were among the poorest 40 per cent of households.
• Despite the success of the Ujjwala program in providing connections, 'fuel stacking' remains common; in a 2018 survey of rural households in Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, 98 per cent of households with an LPG stove still owned a traditional chulha stove.
• In Jharkhand, the state-owned distribution company JBVNL is under financial stress due to a gap between revenue and supply costs, with residential subsidies accounting for 94.6 per cent of its total subsidies (INR 984 crore) in FY 2019/20.
• The report suggests that energy subsidies could be integrated into a universal basic income transfer, provided such a move does not roll back efforts to promote clean energy consumption.

APA

Sharma, S., Jain, P., Moerenhout, T., & Beaton, C. (2019). How to Target Electricity and LPG Subsidies in India. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/target-electricity-lpg-subsidies-india-step-1.pdf

Chicago

Sharma, Shruti, Purva Jain, Tom Moerenhout, and Christopher Beaton. How to Target Electricity and LPG Subsidies in India. International Institute for Sustainable Development, 2019. https://www.iisd.org/system/files/publications/target-electricity-lpg-subsidies-india-step-1.pdf.

Wikipedia

{{cite report |last1=Sharma |first1=Shruti |last2=Jain |first2=Purva |last3=Moerenhout |first3=Tom |last4=Beaton |first4=Christopher |title=How to Target Electricity and LPG Subsidies in India |publisher=International Institute for Sustainable Development |date=December 2019 |url=https://www.iisd.org/system/files/publications/target-electricity-lpg-subsidies-india-step-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sharma2019how, author = {Sharma, Shruti and Jain, Purva and Moerenhout, Tom and Beaton, Christopher}, title = {{How to Target Electricity and LPG Subsidies in India}}, institution = {International Institute for Sustainable Development}, year = {2019}, month = dec, url = {https://www.iisd.org/system/files/publications/target-electricity-lpg-subsidies-india-step-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }