SUBSIDIES TO LIQUEFIED PETROLEUM GAS IN INDIA

The report finds that India's LPG subsidy system is highly regressive, primarily benefiting wealthy urban households while the poorest fifth of the population receives less than 1% of the total direct subsidy. While an initial household cylinder cap of six in September 2012 temporarily limited subsidy growth and improved distribution, subsequent increases of the cap to nine and then 12 cylinders effectively reversed these gains. The Direct Benefit Transfer (DBT) program is criticized for failing to decouple subsidy receipt from fuel consumption and for introducing administrative inefficiencies without improving equity or fiscal responsibility.

• LPG subsidies in India are highly regressive, with the top 20% of the population by consumption expenditure receiving 60% of the total direct subsidy, while the bottom 20% receive only 0.8%.
• The introduction of a six-cylinder household cap in September 2012 successfully limited subsidy expenditure growth and improved social distribution, but these effects were undone by subsequent increases of the cap to nine and then 12 cylinders by January 2014.
• The Direct Benefit Transfer (DBT) for LPG program is viewed as an ineffective tool for equity or fiscal responsibility because it does not decouple the subsidy from fuel consumption and maintains the regressive distribution of the existing system.
• India's LPG subsidy expenditure is driven by both direct budgetary subsidies and OMC under-recoveries, with the latter increasing significantly due to domestic currency depreciation and high international oil prices; in FY 2012/13, under-recoveries for domestic LPG reached INR 39,558 crore.
• LPG distribution and subsidy benefits are heavily skewed toward urban areas and specific states; Maharashtra, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, and Karnataka together receive approximately half of all subsidy transfers.
• Efforts to clean up the subsidy system through connection validation resulted in the blocking of approximately 3.2 million irregular connections by May 2012 and at least 13.3 million unused and duplicate connections by mid-November 2012.

APA

International Institute for Sustainable Development (2014). SUBSIDIES TO LIQUEFIED PETROLEUM GAS IN INDIA. https://www.iisd.org/gsi/sites/default/files/ffs_india_lpg_overview_2014.pdf

Chicago

International Institute for Sustainable Development. SUBSIDIES TO LIQUEFIED PETROLEUM GAS IN INDIA. 2014. https://www.iisd.org/gsi/sites/default/files/ffs_india_lpg_overview_2014.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=SUBSIDIES TO LIQUEFIED PETROLEUM GAS IN INDIA |date=March 2014 |url=https://www.iisd.org/gsi/sites/default/files/ffs_india_lpg_overview_2014.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2014subsidies, author = {{International Institute for Sustainable Development}}, title = {{SUBSIDIES TO LIQUEFIED PETROLEUM GAS IN INDIA}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = mar, url = {https://www.iisd.org/gsi/sites/default/files/ffs_india_lpg_overview_2014.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }