A Large Number of the Public Is Currently Eyeing the Ujjwala Scheme as an Election Incentive…
The Union Cabinet approved the expansion of the Pradhan Mantri Ujjwala Yojana (PMUY) with the aim of including an additional 75 lakh impoverished households in the program over the next three years. This endeavor is estimated to cost around Rs 1,650 crore. The decision to expand PMUY follows the government’s announcement on August 29th to reduce the price of a gas cylinder by Rs 200 for domestic consumers and to increase the PMUY beneficiary base from 9.60 crore to 10.35 crore.
This decision to cut prices and expand PMUY is seen as a strategic move by the government ahead of upcoming Assembly elections in five states and next year’s Lok Sabha elections. The government has presented this as a gift to the public on the occasions of Raksha Bandhan and Onam.
It’s essential to note that the estimated cost of Rs 1,650 crore covers only the expense of connecting the new 75 lakh PMUY beneficiaries over the years 2023-24, 2024-25, and 2025-26. This cost does not include the targeted subsidy of Rs 200 per 14.2-kg cooking gas cylinder for up to 12 refills per year. Under PMUY, free cooking gas connections, stoves, and initial cylinders are provided to women from disadvantaged households. The Rs 200 per cylinder subsidy, transferred to beneficiaries by oil marketing companies (OMCs), is also funded by the government through reimbursements to OMCs.
The government’s rationale for this expansion is rooted in the fact that there are still eligible households without access to LPG due to various reasons, including population growth, marriages, migration, and remote locations. PMUY has been lauded as a successful social welfare program that has significantly increased LPG penetration in the country from 62% in 2016 to near saturation levels.
Based on government data, the average LPG refill rate for PMUY beneficiaries in the fiscal year 2022-23 was 3.71 cylinders. With the current beneficiary base of 9.6 crore, this translates to a total of 35.6 crore 14.2-kg cylinders consumed annually, resulting in a subsidy cost of over Rs 7,100 crore per year. For the targeted 10.35 crore beneficiary base, assuming a refill rate of 3.71 cylinders per year and a constant subsidy of Rs 200 per cylinder, the annualized cooking gas subsidy bill is projected to be approximately Rs 7,700 crore.
Notably, the government ceased providing cooking gas subsidies in the early months of the 2020-21 fiscal year when global oil and fuel prices plummeted. Subsequently, subsidies were reinstated but limited to poor households covered under the PMUY.
While the government will bear the cost of expanding the PMUY beneficiary base and the resulting increase in subsidy expenditure, the burden of the price cut is expected to be absorbed by OMCs, at least for the time being, according to sources familiar with the matter.
