By Sania Siddiqui, Amity Law School, Jaipur.

The Government of India provides Liquefied Petroleum Gas (LPG) to domestic households at heavily subsidized rates in 14.2 Kg cylinders up to the prevailing cap of cylinders per annum per household. Supplies are made by the consumer through a wide distributor network of Oil Marketing Companies (OMCs). LPG cylinders from 186 bottling plants are sent to more than 13000 distributors to serve more than 16 crore households, covering more than half of the country’s population, delivering more than 30 lakh cylinders every day. All the social groups are impacted by the delivery of LPG cylinders as it is an essential commodity for almost 50% of the households (a larger percentage in the urban areas). LPG is a clean fuel and over 16 crore households use it for cooking purposes at highly subsidized rates. The total subsidy burden is Rs. 46,000/- car for 2013-14.

The fact that such a huge amount of subsidy is being provided to consumers imposing an unimaginable burden on the state exchequer, is a matter of grave concern. As this fact has not been effectively communicated to the consumers, there has been a growing sense of entitlement on the part of the consumer to the subsidy. Apart from the lack of awareness of the huge subsidy burden, the price of domestic subsidized LPG below the market price has also led to diversion of subsidized LPG to commercial purposes, which unnecessarily adds to the subsidy burden on the exchequer. LPG is an essential commodity, its supply and distribution has been regulated by various regulations to control the trade and illegal diversion. However, the prevention of such activities has at best been minimal, primarily due to the large scale of the LPG supply chain.


The only way to prevent this diversion is to move LPG in the supply chain at one market price so that the incentive for diversion is eliminated. This is the backdrop of the Direct Benefits Transfer for LPG (DBTL) Consumers scheme.

PaHaL, which covers more than. 9.75 crore LPG consumers, is perhaps the world’s largest cash transfer program as compared to similar programs in other countries, such as China, Mexico and Brazil. Under PaHaL, LPG cylinders are sold at market rates and entitled consumers get the subsidy directly into their bank accounts.

The LPG supply chain was opaque and LPG consumers were powerless, and were at the mercy of the distributors in a monopoly market structure. The government at one hand wanted overcome these obstacles and delivery good services to citizens and on the other hand wanted to reduce their subsidy burden by curbing the diversion of subsidized cylinders meant for domestic consumers into the commercial market. Hence, a task force was set up to suggest a solution to this problem. One of the recommendations was to infuse transparency and efficiency into the supply chain of LPG. The Task force suggested a framework which would lead to better management of subsidy and reduction in the burden to the exchequer. Information technology has become an enabler to achieve these objectives. The  Government decided to launch PAHAL or Direct Benefits Transfer for LPG (DBTL) scheme for LPG consumers across the country.

PaHaL aims to reduce diversion and eliminate duplicate or bogus LPG connections.

The Prime Minister conveyed his congratulations for the scheme having witnessed massive enrollment in a short span of time. As on date, 9.75 crore LPG consumers have joined the scheme. This is 66% of the total consumer base of 15 crore.

An amount of Rs. 3654 crore has already been transferred into the bank accounts of LPG consumers through 9.25 core transactions. The modified scheme has put in place various mechanisms to simplify enrollment and enhance consumer convenience, and thus, only 1.09 lakh complaints have been received so far, which constitute a mere 0.1% of the transactions. Over 85% of the complaints have been resolved.

Preliminary data from 54 districts indicate that the growth of subsidized LPG has reduced significantly accompanied by a corresponding increase in sales of commercial LPG. This indicates that the scheme will enable substantive savings in subsidy which can then be deployed for other productive purposes, without reducing any entitlements of existing consumers.

The success of the scheme is a result of an intensive Information Education Campaign comprising advertising through various means, direct reaching out to consumers, and dealer level campaigns. The Ministry of Petroleum and Natural Gas has undertaken several innovative measures such as guardian officers for each district, deployment of technology by the use of SMS, and a single windows port to enable consumers to join the scheme. This portal is an important step in bringing transparency and gives details of who is benefiting from subsidies.

The Prime Minister said that after Pradhaan Mantri Jan Dhan Yojana, this is the next big scheme which will substantially benefit the economy. He directed that all steps should be taken to bring the remaining LPG consumers into the fold of PaHaL as soon as possible. He wanted Aadhaar enrollment and linkages with bank accounts to be expedited, taking advantage of the Pradhan Mantri Jan Dhan Yojana. The Prime Minister has also asked for an impact analysis of the program to be conducted in a professional manner.

The direct benefit transfer scheme for LPG subsidy now called as PAHAL, is aimed at helping prevent rerouting and illicit business of LPG & stoped leakage of subsidy . The modified scheme brings the transparency and it directly benefits the consumer & enhance consumer convenience. This scheme  enables government saving in subsidy which can be used for productive purposes. Under Pahal LPG cylinders will be sold at market rates. Millions of consumers have joined the scheme and it turned into a Huge success.