How to Target Electricity and LPG Subsidies in India

The report examines the high cost and regressive nature of India's energy consumption subsidies, which totaled INR 87,830 crore (USD 13.1 billion) in 2017. It highlights a critical knowledge gap, as the last comprehensive distributional analysis is based on 2011 census data. The document proposes several targeting mechanisms, including opt-out schemes, volumetric quotas, categorical targeting based on social or geographic criteria, and the use of proxy means testing via income and asset data. It specifically analyzes the Ujjwala scheme's success in connection targeting and the challenges of sustained LPG usage among the poor due to ongoing consumption costs.

• In 2017, India's electricity and LPG consumption subsidies cost 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).
• Historical data from 2010 indicates that electricity subsidies in India were regressive, with the poorest quintile receiving only 14 per cent of the benefits.
• The PAHAL cash transfer scheme is the largest single petroleum product subsidy in India, estimated at INR 12,905 crore (USD 1.9 billion) in FY 2017/18.
• The Ujjwala scheme has been relatively successful in targeting the poorest for LPG connections, with 48 per cent of beneficiaries falling within the poorest 40 per cent of households based on self-reported income in Jharkhand and Chhattisgarh.
• Despite LPG ownership, fuel stacking remains prevalent; in a 2018 survey of rural households in Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, 73 per cent of those with LPG stoves still used traditional chulha stoves for some or all cooking.
• The 'Give It Up' opt-out campaign for LPG has had limited impact on targeting, with only around 5 per cent of active connections de-registering.
• Income-based targeting for LPG, which excludes households with an annual income above INR 1 million, has restricted less than 1 per cent of active connections.
• There is a significant data gap in India's energy policy, as the last comprehensive distributional analysis of energy consumption subsidies is based on the 2011 census.
• The report suggests that volumetric targeting for LPG could be improved by reducing the current annual quota of 12 cylinders, noting that the median purchase for Ujjwala households is five cylinders per year.

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} }