Ujjwala Scheme Falters, Leading To Loss For Gas Companies

The ‘Ujjwala’ scheme is one of the flagship schemes of the Modi government, but it seems that it is causing major losses to gas companies, including Indian Oil and Bharat Petroleum. The scheme had begun with a 50-50 formula, i.e., the Central government would provide 50% and the other 50% was to be given as loans by these companies to the beneficiaries. It was further decided that the companies would recover their loans through the subsidy amount given to the beneficiaries, but this did not transpire.

Though a large number of cylinders were given out and people purchased a lot of gas connections, but now that people do not have the money to refill their cylinders, it is the companies that are bearing the loss. One report says that companies may be facing a loss to the tune of ₹4,000 crore.

What Is The Ujjwala Scheme?

The scheme was inaugurated in 2016 by Prime Minister Narendra Modi. The scheme had aimed to disburse clean cooking fuel to 8 crore women/families under the poverty line. The government had promised to supply LPG cylinders to households under this scheme. Initially, the cylinders cost between ₹4-5,000, but because the government bougtht in bulk, it came down to  ₹3,200.

Of this, the Central government paid half the amount, i.e. ₹1,600, while the balance was to be paid by the buyer. It was decided that the beneficiary could either pay the remaining amount in full or take a loan from the gas company. The companies would recover the amount though the subsidies given to the beneficiaries under this scheme.

Nw companies may have bear the vrunt of losses due to this scheme since consumers are unable/unwilling to refill their cylinders due to the sky-high prices of cooking gas (and other fuels). In such a scenario they are not receiving subsidies on gas and therefore the companies to whom they owe money are not able to recover it. Moreover, officials say that the Centre has also refused to make up for this loss to gas companies.

At the beginning of this year, a cylinder of cooking gas cost ₹700 whereas by 6 October, the price increased to ₹899.50. On an average, a cylinder is refilled 7.1 times in India, but government data says that the beneficiaries of this scheme refill their cylinders only 3.1 times.

Indian Oil May Face Greater Losses

Indian oil faces significant losses if outstanding dues are not recovered from consumers. A total of 30 crore people use LPG, of which 12.8 crore are Indian Oil customers alone. Other than Indian Oil, 8.5 crore people use Bharat Gas and 8.7 crore people are Hindustan petroleum consumers.

Indian Oil had issued 1.1 crore connections in FY 2017-18 under the Ujjwala scheme. Of these, 36.5 lakh did not return to refill their cylinder. Similarly,Bharat Petroleum issued 59lakh conections during this period of which 21.7 lakh were not refilled. Hindustan Petroleum has established 1.6 crore connections till January 2019 from the scheme’s inception.

Ujjwala Yojana 2.0

Despite this burden on companies, the government has launched another iteration of the scheme titled ‘Ujjwala 2.0’ which will provide LPG connections to a further 1 crore people on the same terms. More than 1 crore applications have already been received for this scheme.