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Budget 2018: Would Arun Jaitley consider increasing spend on Ujjwala scheme?

With the Union Budget 2018 around the corner, here are a few broad areas, the issues within each, need the urgent attention of the government.

Increase in LPG subsidy

The Pradhan Mantri Ujjawala Yojana (Ujjwala scheme) has been a big hit in rural areas. Poor people with no alternative other than wood and cow dung cakes finally have access to a clean fuel. More than three crore households have got access to LPG in a little over 18 months – quite an impressive performance. However, as we all know, usage of cylinders is a cause for concern and not all beneficiaries are utilising gas cylinders regularly and tend to go back to their chulah’s.

While some of the challenges around non-usage are emanating from behavioural issues; there are logistical and pricing issues as well which constrain the segment that Ujjwala targets. Can the budget increase spend on Ujjwala? Can the beneficiaries, looking at the vulnerable segments that Ujjwala targets, get a bigger helping hand from the government?

Representational image. Reuters.

Representational image. Reuters.

Typically an LPG cylinder costs on an average, Rs 730. Households get a subsidy of Rs 240 which makes the final cost to the household to be Rs 490 per cylinder.

There is a case for increasing the subsidy amount to poor households and ensuring door step delivery of cylinders in rural areas; just as is the case in urban areas. This will involve subsidising the delivery of gas cylinders.

Poor people cannot be expected to travel 5 – 10 kilometres and spend a day to get a gas cylinder. For daily wage workers and farmers this will involve directs costs and opportunity cost which can be more than the subsidy itself. Can the Finance Minister in budget 2018, increase the budgetary outlay for Ujjwala and/or ensure door step delivery of cylinders by higher commission to rural dealers? We owe it to our poor, especially women to get them access to clean fuel.

Electricity for new users in rural India

The effective supply of electricity has a direct bearing on other fuel choices such as kerosene and LPG. Mitul Thapliyal, who heads the government and social Impact domain in MicroSave, noted that access, availability and reliability remain the main issue with electricity distribution in rural India. Despite the subsidy, uptake and usage remain low due to the erratic supply of electricity.

We recommend that as the government phases out the kerosene subsidy, it should ensure that eligible people have access to electricity either through Saubhagya scheme or distributed sources of energy. Some people may be pushed into the darkness if the kerosene subsidy is removed without another reliable source of lighting.

The government could give a subsidy of Rs 100 to people to at least start using electricity. Alternately, the government could think of introducing a pre-paid system for distributing electricity. Under this system, people can buy fixed units of electricity in advance, or receive fixed units for free and then the supply would shut off.

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(The author is Managing Director – Asia, MicroSave. MicroSave is an international financial inclusion consulting firm that operates across Asia and Africa.)


Published Date: Jan 31, 2018 23:32 PM | Updated Date: Feb 01, 2018 00:24 AM

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