How to Target LPG Subsidies in India

This report evaluates the distribution of liquefied petroleum gas (LPG) subsidies in the Indian state of Jharkhand and tests policy options to improve targeting. Using survey data from 960 households, the study finds that current subsidies are highly regressive, with a disproportionate share of benefits accruing to wealthier households due to their higher consumption rates. The report tests two targeting strategies—volumetric limits and differential subsidies for Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries—but finds that neither significantly improves subsidy incidence, though volumetric targeting does reduce overall government expenditure.

• LPG subsidies in Jharkhand are highly regressive, with wealthier households receiving a larger share of benefits than poorer households. Based on expenditure quintiles, the richest 40% of rural households receive 53% of subsidy benefits, while the poorest 40% receive 28%; a similar pattern exists for urban households, where the top two quintiles receive 54% and the bottom two receive 27%.
• The regressive nature of the subsidies is primarily driven by consumption patterns: wealthier households consume significantly more LPG cylinders per year than poorer households. In rural areas, the richest quintile consumes over four cylinders annually compared to 1.6 for the poorest quintile; in urban areas, the richest consume about eight cylinders compared to about three for the poorest.

APA

Sharma, S., Moerenhout, T., Aklin, M., & Bajaj, K. (2021). How to Target LPG Subsidies in India. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-04/target-lpg-subsidies-india-jharkhand.pdf

Chicago

Sharma, Shruti, Tom Moerenhout, Michaël Aklin, and Kavya Bajaj. How to Target LPG Subsidies in India. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-04/target-lpg-subsidies-india-jharkhand.pdf.

Wikipedia

{{cite report |last1=Sharma |first1=Shruti |last2=Moerenhout |first2=Tom |last3=Aklin |first3=Michaël |last4=Bajaj |first4=Kavya |title=How to Target LPG Subsidies in India |publisher=International Institute for Sustainable Development |date=May 2021 |url=https://www.iisd.org/system/files/2021-04/target-lpg-subsidies-india-jharkhand.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sharma2021how, author = {Sharma, Shruti and Moerenhout, Tom and Aklin, Michaël and Bajaj, Kavya}, title = {{How to Target LPG Subsidies in India}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = may, url = {https://www.iisd.org/system/files/2021-04/target-lpg-subsidies-india-jharkhand.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }