PM launches Ujjwala Yojana 2.0 in poll-bound UP

“Ujjwala Yojana has led to manifold expansion of LPG gas infrastructure,” Modi said, adding that “during the last six-seven years more than 11,000 LPG distribution centres have been opened”.

Prime Minister Narendra Modi on Tuesday launched the second edition of the Pradhan Mantri Ujjwala Yojana (PMUY) at Mahoba in poll-bound Uttar Pradesh, to further increase the penetration of LPG in cooking by providing free connections to the poor.

In the Budget for FY22, the government had pledged to provide one crore more LPG connections under the PMUY.

The first edition of the PMUY was launched in May 2016 from Ballia in Uttar Pradesh in the run up to the assembly elections held in February-March 2017. The next assembly election in the state is scheduled to start in February 2022.

In the first phase of the scheme, eight crore beneficiaries have received free LPG connections till date. The government paid Rs 1,600/ user to oil marketing companies (OMCs) to cover the cost of providing connections and cylinders to the first-time LPG users under PMUY-1. OMCs also provided interest-free loans to PMUY beneficiaries to cover the cost of the first refill. The modalities for releasing new connections under PMUY-2 have not been made public yet.

“Ujjwala Yojana has led to manifold expansion of LPG gas infrastructure,” Modi said, adding that “during the last six-seven years more than 11,000 LPG distribution centres have been opened”.

With 1.5 crore users, PMUY has the largest number of beneficiaries in Uttar Pradesh, followed by 88 lakh connections in West Bengal, 85 lakh in Bihar and 71.4 lakh in Madhya Pradesh. Including PMUY users, there are currently around 29.1 crore active LPG consumers in the country.

The PMUY-2 is seen to provide maximum benefit to families that have migrated from villages to cities or to other states for work. “These workers from other places need not run from pillar to post for address proof,” Modi said, adding that “the government has full faith in the honesty of the migrant workers” and “all one has to do is give a self-declaration of the address for getting a gas connection”.

OMCs have found a significant increase in the credit risk in case of certain PMUY loans provided for the first cylinder refill. Considering past experience and time elapsed since the last refill, Indian Oil Corporation (IOCL), as of FY21-end, has categorised loans worth Rs 910.45 crore as “doubtful” out of the Rs 3,022.6 crore lent to PMUY consumers. Hindustan Petroleum has created a provision of impairment for Rs 618 crore till March 2021 against loans of `1,882.3 crore extended to PMUY consumers.

Since the loan amount for the first refill for users under PMUY-1 was to be recovered from the subsidy amount payable by the government to customers on each refill, it is also not immediately clear how OMCs plan the recovery of the remaining loan amount if the current no-subsidy regime persists. The Centre has stopped providing subsidy for LPG cylinders since May 2020, and with retail price sans subsidy of domestic LPG cylinders currently surpassing the Rs 800-mark, doubts have been raised on the refilling capacity of low-income users.

The government recently informed Parliament that out of the eight crore PMUY beneficiaries, less than 4.8 crore consumers have refilled their LPG cylinders at least once in the first quarter of FY22.

PMUY beneficiaries refilled 3.01 cylinders on an average in FY20, and their average consumption had increased 44% annually in FY21. According to a recent response to a Parliament question by the minister of state of the petroleum and natural gas ministry Rameswar Teli, as many as 7.9 crore PMUY consumers had refilled their LPG cylinders in FY21.

The rise in consumption can be explained by the benefit provided to PMUY users under the Pradhan Mantri Garib Kalyan Yojana, wherein the cost of LPG cylinder refills was paid in advance to the bank accounts of the beneficiaries during Covid-19 lockdowns in 2020. As many as 14.2 crore free cylinders were distributed free of cost to the PMUY beneficiaries during April-December 2020 under this package.