Scroll.in report on PM’s plan for free gas connections has a false premise: Indian Oil’s rejoinder

This is with regard to Nitin Sethi and Aroon Deep’s article published on Scroll.in on January 23 titled PM’s plan for free gas connections is failing its objective – as government had been warned it would”. Indian Oil Corporation Limited would like to issue the following clarification in response to the same:

1. CRISIL Report

The CRISIL report (on the transition from biomass fuel to LPG cylinders) as mentioned in the story, is based on a survey done between October and December 2015, when the Prime Minister Ujjwala Yojana had not yet been implemented. Since then, the scheme has developed as a social welfare measure addressing various concerns of affordability, accessibility, and availability. Many of the concerns expressed in the CRISIL report were addressed when the scheme was launched in May 2016.

Pradhan Mantri Ujjwala Yojna was launched with the goal of providing LPG connections to five crore women below the poverty line in the country. The goal of Ujjwala was to improve access to clean energy, reduce health hazards associated with biomass-based cooking, and empower women by putting them at the centre of India’s household energy policy. The authors have reduced the aim of Ujjwala to a line by saying “it is however, failing in its objective of persuading households to stop using firewood and traditional biomass fuels...”

If the duo had considered the process of behaviour change, they would perhaps agree that their premise is flawed. Changing human behaviour requires much more than just providing access – creating awareness and education through mass media campaigns as well as positive reinforcements must be done together to facilitate this change and even then, the process is most likely to be slow.

Under the Prime Minister Ujjwala Yojana, women from below poverty line families are provided free LPG connection, thus meeting the upfront cost of Rs 1,600 that includes security deposit, installation costs, and price of Suraksha hose. This took care of the initial hurdle faced by below poverty line families, that of affordability of LPG connections. Further, to ensure that the beneficiaries use LPG on a continued basis, the Oil Marketing Companies offer a loan facility to below poverty line families to cover the cost of the hotplate and the first refill. This amount is subsequently adjusted against the refill subsidy to the consumers.

The oil industry understands that to make the transistion to LPG consistent in the long run, it shall need other interventions like ensuring last mile availability, even in the remotest parts of the country. The LPG distributor network has been streamlined to overcome geographical limitations, and the Durgam Kshetra Vitraks will specifically serve difficult terrains. Since 2014, 5,300 new distributorships have been commissioned on an industry-basis and 6,400 more are in the pipeline to cater to the increased demand of LPG. As a result, LPG is easily available even in the remote parts of the country, thereby reducing waiting time and queues and aiding hassle-free delivery of cylinders.

2. Use of gas cylinders

The article mentions that though the number of LPG connections has increased by more than 16%, the use of gas cylinders has increased only by 9%. It is pertinent to mention here that there is no direct co-relation between the number of connections and the numbers of gas cylinders consumed. The refill consumed by each household is different and varies based on their cooking patterns. In the past four years, the implementation of Direct Benefit Transfer of LPG has weeded out fake connections, thereby controlling the diversion of domestic refill into the commercial sector. The urban consumer is also shifting to alternate cooking methods – piped natural gas, electric cook stoves, microwaves and the like – for cooking purpose and hence, the LPG consumption per household has not increased exponentially.

3. LPG consumption in rural households

An Indian rural household consumes an estimated four LPG cylinders annually. The current consumption pattern of a Pradhan Mantri Ujjwala Yojana beneficiary is around 4.07 cylinders per annum. This is in line with historical consumption patterns . This is definitely set to increase further as these beneficiaries are increasingly becoming aware of the advantages of using LPG as cooking fuel.

Further, the average number of refills taken by an Ujjwala customer does not represent the varied experiences of these consumers. For every Sukhi Devi who has bought three refills in one year and continues to use her LPG stove in conjunction with her biomass chulha, there is a Ranju Devi who has switched completely to LPG and has bought 10 refills so far. For every Sukhmani Sahoo who is dependent on her husband to finance refills, there is a Malti Jena who utilised the time freed up from cooking by picking up tailoring jobs and is earning enough to finance her LPG refills. All of these experiences are real. These experiences cannot be averaged, nor can the success or failure of a scheme be reduced to the experience of one or a few beneficiaries.

In addition, all-out efforts are being made to make five-kg cylinders available in rural markets, which will lead to low one-time expenditure on a refill, thus making it more affordable for even below poverty line households. Also large scale educational programmes through LPG panchayats are on the anvil, which will drive home the health, environmental and convenience benefits of using this clean cooking fuel as opposed to other biomass-based alternatives.

– Subodh Dakwale
Executive Director (Corporate Communications and Branding),
Head Office, Indian Oil, Mumbai

Authors respond

The authors respond:

1. On the timing of CRISIL report: As the story points out, the survey was commissioned before the scheme was launched. But the report was submitted by CRISIL in June 2016, three months after the Union cabinet had approved the scheme and one month after the Prime Minister had launched it on May 1. The government could not possibly have predicted the results of the study before its submission and responded to the concerns in it. This is also evident from the provisions of the scheme, which do not deal with high costs of cylinders or the weak distribution network for LPG – something that the CRISIL report highlighted as equally important.
   
2. On the aim or objective of the scheme: As our story pointed out, quoting the prime minister himself, the objective of the scheme is to wean households away from dirtier cooking fuels. The prime minister said, “According to me, her ease of living is possible if I free her [rural women] from that smoke. I took the big step of Ujjwala and provided gas to 3,30,00,000 families.”
3. On the need for behavioural change: This is exactly what our report says, based on reports and data from the government – that the scheme, with its orientation towards meeting the targets for connections, falls short of attaining its objective. As reports by CRISIL and others point out, besides behavioural change, reduced cost of connection, reduced cost of refills, the existence of distribution network are all essential for poorer households to shift to LPG gas.
   
4. On the weak distribution system: Data from the Ministry of Petroleum and Natural Gas shows that the distribution system for LPG cylinders was in fact growing much faster in 2014-’15 than it was after the launch of the scheme in 2016-’17.
   

Another data set also proves that attempts by the government and the oil manufacturing companies to strenghten the distribution network for LPG cylinders has been inadequate. The CRISIL study cited in our news report mentions that more than 75% people had to wait for more than three days for a refill and 26% waited for more than 15 days. This survey was done in 2015-’16, a year after the distribution network reached a five-year high.

5. On the correlation between number of connections and number of LPG cylinders used: The relationship and ratio between number of connections and the number of gas cylinders used in a year in a country is obvious. This relationship can undergo a change when a fundamental shift happens in the market – such as in prices of LPG cylinders (as has happened). The degree of change in the ratio between connections and sale of LPG would depend on the price elasticity of demand. It could also occur when the government undertakes target-based distribution of connections without concomitant sales of cylinders (to which the story refers).

Government data shows that even after weeding out of fake connections, the total number of connections continued to grow each year between 2014-’15 and 2016-’17, as did the number of cylinders sold, maintaining a similar ratio each year. This ratio is not maintained after the launch of the scheme, proving that sale of cylinders has not kept pace with the number of connections provided.

The number of connections with one regulator and two cylinders has also steadily increased. The number of active LPG customers has also increased from 148.5 million to 214.1 million between 2014 and September 2017.

6. On the number of cylinders being consumed: The numbers cited are not corroborated by data on the consumption of LPG by households, regularly released by the Ministry of Petroleum and Natural Gas – including the latest data set of January 2018 – or the information provided under Right to Information Act on monthly sales of LPG cylinders over the past five years. In fact, the number contradicts Indian Oil’s assertion above that the sale of cylinders is falling because of the use of piped natural gas and electric stoves.

The Parliamentary Standing Committee put the average consumption of cylinders per household in a year at 6.27 for 2015-’16, which has consistently fallen since then. This at best correlates closer to the increase in LPG prices over the period and increased number of connections even as the government decided to to reduce the subsidy on cylinders.

7. On not using averages to test the efficacy of the scheme: This suggests there is no way to assess the performance of the scheme at a macro scale. The performance of the scheme of this magnitude and spread can only be assessed using averages and trends – such as the study done by CRISIL, upon being commissioned by the government. Subjective picking of samples and examples may not be reflective of the performance of the scheme.

8. On the increasing sale of five-kg cylinders: While it is true that the total number of 5 kg cylinders sold to households has grown by two times between 2015-’16 and 2016-’17, the sale of gas through 5 kg cylinders comprised a minuscule 0.8% of the total LPG consumption in households even in 2016-’17.

9. On educational programmes like LPG panchayats: The educational programmes, as Indian Oil notes, is only on the anvil and were announced as recently as September 2017. The story, in contrast, assessed how the Ujjwala scheme has performed up to September 2017, for which the data is available either publicly or through Right to Information.