ASSESSING THE CONSUMER PERCEPTION TOWARDS THE MISUSE OF LPG SUBSIDIES IN INDIA

Transcription

1 ASSESSING THE CONSUMER PERCEPTION TOWARDS THE MISUSE OF LPG SUBSIDIES IN INDIA Swati Sukhija Research Scholar, School of Management Studies, Punjabi University, Patiala Dr. Deepika Singla Asst. Prof., P.G.Deptt. of Commerce, M.M.Modi College, Patiala Introduction In principle, any measure that keeps prices for energy consumers below market levels or for energy producers above market levels or that reduces costs for consumers or producers may be considered a subsidy.this study aims to take a comprehensive look at a little discussed problem that makes policy makers more thoughtful- LPG subsidies. This is a remarkably important issue because the presence of such subsidies would appear to be damaging on two fronts not only is a market for LPG is being distorted such that too much of the LPG may be consumed, but subsidy on LPG is regressive in nature. On the other side of the coin, this means that there is a potential double dividend from the removal of these subsidies. Economies may see an improved allocation of resources, and action to combat increased government cost could be achieved in one fell swoop. In other words, LPG subsidy elimination could be a socio economic mitigation policy that could be achieved at negative cost, and is therefore particularly worthy of investigation. As with all such negative-cost policy options however, the fact that they have not yet been undertaken fully despite the winwin characteristics suggests that there are hidden costs or some other barrier to their uptake. Academic research on the energy subsidy reforms dates back to the 1960 s and it blossomed in 1990 s and 2000 s as many of the countries are still in the process of subsidy reforms. Subsidies are a problem in practically every country in the world. The effects of subsidies, however, go beyond their fiscal costs. They are also a major impediment to growth. For example, subsidies dislocate main public spending that can boost growth like development of infrastructure, education, and health care. Cheap energy can also lead to overconsumption of energy, which aggravates environmental problems, such as pollution and climate change. Even many of the countries impose taxes on energy; they re rarely high enough to account for all of the adverse effects of excessive energy consumption, including 80

2 harmful effects on the environment. Subsidies factually lower the costs paid by energy consumers i.e. many policy makers argue that these are very beneficial, especially for the poor (Hart Energy, 2015). In India, LPG Subsidies are focused on providing financial benefits to the BPL families, social and environmental welfare. LPG subsidies are helpful in removing deforestation pressure. Subsidized LPG is also helpful in improving the health of the women in poor families by decreasing the emission of carbon gases. In India, LPG subsidies are misused. LPG cylinders are also used commercially such as for automobile fuel, stalls, dhabas, hotels etc. There is a wide gap between the price of commercial and domestic cylinders. Subsidized cylinders are available at much lower prices than the market price so it leads to over consumption of energy. LPG subsidies are becoming wasteful with the excessive consumption of LPG. Removal of LPG subsidy will decrease the misuse of subsidies significantly. Due to subsidies expenditure, fiscal deficits increases and ultimately GDP declines. One of the measures adopted by the government of India is direct cash assistance scheme for transferring funds in the account of beneficiaries to eradicate leakage and black marketing of the cylinders. There is a need to replace the subsidies with more social priority nets to increase the rate of growth of GDP. Social safety nets such as improved infrastructure, higher education and increased job opportunities are the need of the time. Literature review In order to take stock of existing knowledge about subsidies on LPG in India, a literature survey was conducted. This review focused primarily on studies about subsidies given in various countries to provide a deeper understanding of India s situation. Ideally, a literature review includes only articles that have been published in peer-reviewed journals and books. Nevertheless, due to the limited number of accessible articles and books in the public domain about LPG subsidies in India, this study includes both published and unpublished pieces of work. These extend from articles published in reputable peer reviewed journals, working papers, PhD theses to unpublished research reports. Key factors in the selection of unpublished works are the reputation of organizations under which the research took place, and the extent to which the research is intended to be a deep analysis. Searches for the literature were mostly carried out using internet search engines, with such keywords as subsidy or LPG subsidy or impact of subsidies in English in advance 81

3 Google search engine. In addition, the searches were undertaken through visiting various universities and research institutions such as central library of Delhi University and FMS. In order to ensure that the knowledge was current and relevant, only literature that was written or published around 2000 or later has been included for further analysis. Ministry of finance in May 2014 published in a report on Direct Benefit Transfer on LPG that the subsidy burden during was a whopping Rs billion, of which the LPG subsidy alone was Rs. 464 billion. The fact that such a huge amount of subsidy is being provided to consumers imposing an unimaginable burden on the state exchequer, must be a matter of concern of every citizen in India. As this fact has not been communicated effectively to the consumers, there has been a growing sense of entitlement on part of the consumer to the subsidy. Apart from the lack of awareness of the huge subsidy burden, the pricing of such products below the market price has also led to diversion of subsidized LPG to commercial purposes, which unnecessarily adds to the subsidy burden of the exchequer. LPG subsidy burden as can be seen from the table below: Year Subsidy (Rs. Crore) As the subsidy on an LPG cylinder may be as high as 100%, there is a strong incentive for pilferage and diversion. This leads to diversion of subsidized cylinder for commercial purposes. There is only one way to prevent this diversion 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 Benefit Transfer for LPG scheme. Vivien foster 1 in a report submitted to Energy sector management programme: energy and development report 2000 measured the impact of government interventions in the energy market on the poor. Energy sector interventions refer to any reforms in energy prices that significantly affect the cost, quality and conditions of energy access to the poor. The aim of the report was to answer the question how these interventions affect the poor as well as encouraging the option of pro poor energy designs to minimize their negative impact on 82

4 poverty issues. Welfare impact of energy sector on the poor is not same as impact on poverty. For example, energy pricing reform might reduce the prices of LPG to poor households directly increasing their welfare. The same reform indirectly take some of these households out of poverty by releasing women and children from the time consuming task of gathering traditional biomass fuels such as firewood and charcoal moving to LPG. The study developed three set of indicators such as access to energy sector, their affordability and effects on health and education outcome. The outcome of the study gave a holistic view about the energy sector rather than focusing on a single sector of energy. The study concluded that poor make limited use of energy even after getting it at lesser price. The major challenge is to get household information regarding the energy use and poverty issues then only reforms can be implemented successfully. André de Moor 2 published a research paper on Towards a Grand Deal on Subsidies and Climate Change in In this article author explained the various lock in mechanism that lead to subsidy addiction which made the exit from subsidies next to impossible for the policy makers. Number of studies has proved that subsidies are detrimental to the environment and distort the market for energy and make the sustainable development more worsened. Still they exist. Government provides perpetuate subsidies even with their negative implications. There are lock in mechanism that make subsidies reforms difficult to pursue such as economic barriers, institutional and political barriers, technical barriers, international barriers. Economic barriers such as subsidies are given since long time so the beneficiaries become dependent on the subsidies and as such when these subsidies are reformed they forcefully oppose these attempts which make reforms more difficult. The other lock in mechanism is institutional and political barriers such as both subsidy recipient and provider favors hidden form of subsidies which are called off budget subsidies as they don t stress the fiscal budget of the economy and they are often very difficult to reform. The other lock in mechanism is technical barriers as governments lack the skill for reforms and lack the funds to face the transition phase of the reforms. The last but not the least barriers are international barriers as government can t work unilateral. Firstly reforms need international action in order to achieve better objectives domestically. Author has provided many measures to overcome these barriers such as price protection policies should be eliminated and more 83

5 liberalization should be there. Deregulation of prices and re regulation of public energy policies should be implemented in order to get successful reforms. Christopher J. Holton 3 presented a dissertation report on the topic What are the effects of fossil-fuel subsidies on growth, the environment, and inequality in According to author subsidies have impact on environment; national income and it generates inequality. Removal of subsidies is important for any country because it has damaging impact on two fronts such as distortion of market of that good which is subsidized to such an extent that it is over consumed and on the second side it has negative externalities. So author recommended double dividend from the removal of subsidies. Since governments have revenue requirements, if there is little or no positive tax on fuel then more revenue has to be collected elsewhere so other parts of the economy face higher taxes than they otherwise would, further distorting activity and harming GDP. The author developed three hypotheses to test the subsidy significance on environment, income and inequality. The results of the hypothesis were that subsidies are failed in reducing the inequality. Subsidies have significant negative impact on the environment. Subsidies have smaller effect on income and GDP. For removing subsidies, importance of communication strategy for convincing the public about the cost of the subsidies is important. To make them understand that subsidies benefit goes to rich rather than poor, so there arises a need for reforming these ineffective subsidies. According to an OECD report the proportionate adverse impact of inefficient energy subsidy removal can be greatest for the poor, even though the rich receive most of the total value of the subsidy. Shruti Sharma 4 published a paper on Subsidies to Liquefied Petroleum Gas in India: An assessment of the direct benefit transfer in Mysore in 2014 under GSI and IISD. In October 2013, IISD conducted a structured interview from 120 beneficiaries in five taluks1 of Mysore district to assess the DBTL. They categorized the results into three sub parts issues related to subsidies receipt in bank account, issues related to subsidy amount and impact of the scheme on household behavior. The study concluded that attitude of people towards DBTL was negative. They preferred previous system of administrating the LPG. Moreover delivery charges for cylinders were also increased for distributors between 10 to 20 INR. Village people were of the opinion that withdrawal of subsidy from bank account is time consuming and tiresome process and getting cylinders at market rate also impact their budget and 84

6 ultimately increase their borrowings. So it is an implicit financial burden on below poverty line people. The second issue with the poor people that they had to limit their LPG consumption due to its increased price and quota fixation and they replaced it with firewood and other bio mass for some heating and cooking purpose. The results of the study were not all negative; there were some positive outcome as well. Such as people in villages who were previously dependent on kerosene and other firewood found LPG as cleaner fuel, time and labor savior and moreover cooking various items simultaneously and use of efficient utensils on LPG such as pressure cooker saved their time more. Rimawan Pradiptyo et.al. 5 published a paper on Fossil-Fuel Subsidy Reform and Social Welfare in Indonesia: A Literature Survey in Indonesia has been implementing fuel subsidies since the beginning of President Suharto s era in Earlier subsidies did not create any problem to the nation but later on population increased and vehicles also increased so the country became net oil importer since 2004 and the amount of subsidy reached more than 11 % of the central government budget in 2014 and government of Indonesia started bearing tremendous fiscal burden. Oil business of the country has been divided into three parts: downstream, mid stream and up stream. Downstream is subsidized and upstream is not subsidized. Fuel subsidies were started for supporting economic growth, poverty reduction and promoting energy security. But the real conditions evidenced something different from the hypothesis. Due to misallocation of resources well off classes enjoyed more subsidies as compared to the poor class. So argument for poverty reduction got failed. The other issue was price of the subsidized fuel is always lower than the alternative fuel so preventing the development of more innovative and alternative form of energy, ultimately hindering the energy security policy as well. The other argument for the subsidies was economic growth which also got failed as subsidies increased the oil imports which poured more fiscal pressure on the economy and as a result economy declined. Randy T. Simmons et.al 6 published a paper on True Cost of Energy: wind Power in They discussed about various costs hidden in production of energy. These costs are much higher than the actual budgeted costs. For example producing electricity from wind, costs 48% higher than the estimated claim. As it involves certain hidden cost such as Federal PTC, in which subsidies are given to energy producers which distort the demand market as it 85

7 reduces the real cost of production and waves the tax payer money as subsidies to producers not to the innovative technology for energy production. The other hidden cost is Renewable Portfolio Standards in which producers have to purchase electricity produced from renewable sources which also increase the cost of electricity for consumers. Sometimes wind power is unreliable so conventional generators are also required which further increase the cost for consumers and government. Long transmissions grids are required as plants are located away from their consumption houses so it further increases the cost for government. All these costs are born by the government in form of subsidies given to producers from billions of tax payers Dollars. Moreover energy subsidies also include the opportunity cost where these dollars can be used for more priority purposes. Therefore, conclusions from the authors were that consumers must be allowed for the selection of energy sources and they must be charged according to the true cost of the energy. It will generate more income to the government which can be further utilized for consumer s social priorities. Gabriel Di Bella et.al. 7 published a paper on Energy Subsidies in Latin America and the Caribbean: Stocktaking and Policy Challenges in According to authors, energy subsidies pose challenges at aggregate level i.e. At macroeconomic level and at individual level i.e. At microeconomic level. Macroeconomic impacts such as fiscal cost, forgone fiscal revenues and compromising fiscal sustainability. Energy subsidies impose external vulnerabilities through their effect on fiscal deficits by distorting demand and supply. For example in Argentina fiscal deficit shifted trade balance from a surplus in early 2000s to a deficit in Subsidies also have impact on household welfare and income distribution. For example In Bolivia, the poorest 40 percent of households received about 15 percent of total fuel subsidies. Spending on subsidies reduces the availability of public resources for other purposes, which might have more positive distributional impacts for instance, social spending. Subsidies also impose environment and other negative externalities such as environment damage, traffic congestion and health problems. The authors also shared the reform experience of LAC countries regarding rationalizing subsidies that the reforms should be gradual and with well-targeted mitigating measures to the most vulnerable and to groups most affected by the reform. Reforms should aim to establish a price setting mechanism that reflects market signals. For example After the 2008 oil shock, Colombia set up a fuel price stabilization fund (FEPC) as a vehicle to phase out subsidies, which had escalated to about 1 86

8 percent of GDP. Reforms should take into the socio political context. For example social and infrastructure spending, effective communication strategy and improving efficiency are pre requisite for successful reforms. Tim Boersma and Steve Griffith 8 published a paper on Reforming Energy Subsidies- Initial lessons from the United Arab Emirates in January They studied the water and electricity reforms in UAE. When tariffs on water and electricity were increased then all residential, commercial and industrial units decreased their consumption of water and electricity except the governmental units. With significant price increase consumption of water & electricity was decreased by 3% and by 7% by industrial units respectively. The study concluded that the impact of reforms was for 3 years and then it started vanishing. Water demand then stabilized and then marginal increase was started. In terms of social backlash, reports for reforms were all positive except a little breakdown of social contracts between locals and government. Positive thing for UAE reforms was that these were initiated before they become urgent and these reforms were taken at the cost of large expats they were unlikely to take any protests against the government of the country. UAE government was paying off their own cost and nationals were paying their own. UAE government launched an extensive information campaign prior to the reforms in order to explain the upcoming changes to the nationals. So it increased the transparency among the nationals and expats and they decreased their consumption accordingly. Objectives of the study 1. To assess the Consumer Perception towards the misuse of LPG Subsidies 2. To suggest some measures to stop the misuse of subsidies. Research Methodology Research is not only concerned to the revision of the facts and building up to date knowledge but also discover the new facts involved through the process of dynamic changes in the society. It provides the starting point for choosing and approach made of theories, data, concept and definition of the topic. Research methodology answers questions like the why, what, how was the problem formulated, what were the methods employed to collect the data, 87

9 when was the data collected, which technique of analysis were adopted and so on and so forth. Research methodology explains the logic behind the research. Research Method: There are two basic research methods; 1. Qualitative research. 2. Quantitative research. Qualitative research provides insights and understanding of the problem setting. In this study qualitative research was used with a goal of getting insight into a social or human problem, as it is based on daily consumers of LPG who were interviewed to learn about the facts regarding the subsidies on LPG given by the government. Quantitative research seeks to quantify the data and typically, applies some form of statistical analysis. In this research both quantitative and qualitative research were used as complementary rather than in competition with each other. Research Design: Research design is a map developed to guide the research. Research design is a part of planning stage of research, a blue print for the collection, measurement and analysis of data. It explains the procedure necessary for obtaining the information needed to structure or solve research problems. The research design specifies the details- the nuts and bolts- of implementing that approach. The research designs are of two types: 1. Exploratory research design. 2. Conclusive research design. The present research design was exploratory in the initial stages then after gaining the insight into the problem it was verified or quantified by conclusive research. The form of conclusive research design adapted for the study was descriptive in nature. So, basically the study involves explanatory research design which takes into consideration descriptive as well as exploratory data. Sampling Design: The sample of the study was initially based on multi stage cluster sampling. This technique of obtaining a final sample involves drawing several samples from the large population. An important issue in multistage sampling is how many clusters in the form of districts, cities, blocks, and villages to be involved to sample at each stage. The selection of consumers was based on convenience method. Locale of the Study: 88

10 Punjab, Haryana and the Chandigarh are the locale of the study. Selection of Respondents: The respondents were taken with the convenience technique. The respondent age group was selected more than 20 as they can evaluate the situation and understand the usage of LPG cylinders in daily life and the misuse of LPG and can suggest valuable measures to stop the misuse. The sample in the study was restricted to 800 respondents keeping in mind the research objectives and constraints. The respondents were classified into different income groups less than 3 lac, 3 to 6 lac, 6 to 10 lac and more than 10 lac and according to usage of LPG cylinders such as households and industrial consumers. Data was also collected from either of the user of LPG with the help of survey method. Characteristics of Sample: Who is respondent? The respondent to this study is the consumer or user of the LPG. LPG has many industrial as well as domestic uses. LPG is popularly used in kitchens for cooking. LPG is used as a main fuel in motor vehicles as it burns better than diesel and petrol and leaves lesser damaging impact on atmosphere and environment. LPG is also used for centralized heating solutions for domestic as well as industrial premises and for water heating purposes. Apart from all these uses LPG is used as main component in plastic, paper industry and food processing industry as they rely heavily on LPG. Keeping all these uses in mind, consumers of LPG were selected as the respondents of the study. Data Collection: Data is an important tool for the success of the study. In order to make meaningful research a suitable methodology has to be adopted. The study was based on primary data collection of data. Some part of the study involved literature analysis of other countries to assess the various mitigation measures adopted by those countries, but the overall dominance remains with the primary data collecting through the research instrument. Pilot study After the selection of the data collection method, the particular methodology and scale to be used in the survey have been formulated. In the initial phase of the study, several test surveys have been carried out so as to list down various significant factors playing central role in the study in hand. In these types of complex studies, it is better to examine various aspects with the help of pilot surveys. The initial scale includes various statements recorded during the 89

11 direct communication with the respondents, which later on helped to draft a final scale. The questionnaire was tested in pilot study. Use of Scale for Data Collection: The data has been collected through the scale prepared by the researcher herself. Processing & Analysis of Data: The statistical analysis was carried out using IBM SPSS (Statistical Package for Social Sciences) statistical version 20. The analysis includes frequency table, bar & pie chart, association of variables based on Chi-square test and if any cell frequency is <5, than Yates corrections is used for 2x2 contingency table or method pooling and Fisher exact test is used (for higher order than 2x2 table). For not normality distributed data, Median compared using Mann Whitney test (for two groups) and Kruskal Wallis (for more than two groups). For relationship with the different parameters Pearson s correlation was used for data normally distributed and Spearman rank correlation was used for data not normally distributed. All statistical tests were seen at two-tailed level of significance (p 0.01 and p 0.05). Statistical Framework: Along with simple techniques like frequencies, percentages and averages, advanced statistical tools were also applied to analyze the data. These tools are as under: 1. Chi-Square Test In order to see the association between two way classifications of respondents, Chi-square test was applied by using the following formula: Where X2 = Chi-Square Value O = Observed Frequency E = Expected Frequency = Summation 2. Spearman s Rank Correlation: In statistics, Spearman's rank correlation coefficient or Spearman's rho, is a nonparametric measure of rank correlation (statistical dependence between the ranking of two variables). It assesses how well the relationship between two variables can be described using a monotonic function. 90

12 3. Kruskal Wallis test: The Kruskal Wallis test by ranks or One-way ANOVA on ranks is a non parametric method for testing whether samples originate from the same distribution. It is used for comparing two or more independent samples of equal or different sample sizes. It extends the Mann Whitney U test when there are more than two groups. The parametric equivalent of the Wallis test indicates that at least one sample stochastically dominates one other sample. 4. Mann- Whitney U Test: In statistics, the Mann Whitney U test (also called the Mann Whitney Wilcoxon (MWW), Wilcoxon rank-sum test, or Wilcoxon Mann Whitney test) is a nonparametric test of the null hypothesis that it is equally likely that a randomly selected value from one sample will be less than or greater than a randomly selected value from a second sample. Discussions and Results Table: 4.1 LPG Subsidies are misused in India Kruskal-Wallis test is the one-way analysis of variance (ANOVA). A significant Kruskal- Answer Strongly Disagree Disagree Agree Strongly Agree Total Household/ Household % % % % 698 Industry Industry % % % % 66 Age <= % % % % % % % % % % % % % % % % 106 >= % % % 1 4.8% 21 State Punjab % % % % 454 Haryana % % % % 269 Chandigarh % % % % 41 Type of Nuclear % % % % 471 Family Joint % % % % 293 Gross <= % % % % 220 Family % % % % 272 Income % % % %

13 Cylinder are Consumed in a year > % % % % 115 Up to % % % % % % % % 146 More than % % % % Total % % % % 764 Table 4.1(a) Pearson s values for LPG Subsidies are Misused in India Chi-square Df Sig. Household/Industry Age * State * Type of Family * Gross Family Income * Cylinder consumed in a year * The above tables show that age has significant impact on consumer perception towards the misuse of LPG subsidies. Majority of the respondents from the age limit less than 30 agree on the statement that LPG subsidies are misused in India. Almost 66% respondents from the age category & agree on the statement that LPG subsidies are misused in India. Majority of the respondents more than 61 year of age disagree on the statement that LPG subsidies are misused in India. Family income has significant impact (p=.000) on the respondents opinion regarding misusage of LPG subsidies in India. More than 70% respondents from the income category more than 10 lacks thinks that LPG subsidies are misused in India while almost 60% respondents from income category less than 3 lacks agree with the statement. Respondents belonging to different type of families have significant difference in their opinion regarding misusage of LPG subsidies in India. Table 4.1(a) defines the highly significant results according to primary data as collected from the respondents. Using chi-square test, for age, sig. value (.001 <.01) represents that there is significant difference at 1 percent level of significance, for state, sig. value (.005 <.01) represents that there is significant difference at 1 percent level of significance, for type of family, sig. value (.038 <.05) represents that there is significant difference at 5 percent level of significance, for gross family income, sig. value (.000 <.01) represents that there is significant difference at 1 percent level of significance and for cylinders consumed in a year, 92

14 sig. value (.015 <.05) represents that there is significant difference at 5 percent level of significance between the opinions of respondents for LPG subsidies are misused in India. Table: 4.2 Subsidies on LPG results in Over Consumption of Cylinders Answer Strongly Disagree Disagree Agree Strongly Agree Total Household/ Household % % % % 698 Industry Industry 2 3.0% % % % 66 Age <= % % % % % % % % % % % % % % % 9 8.5% 106 >= % % % 2 9.5% 21 State Punjab % % % % 454 Haryana % % % % 269 Chandigarh 4 9.8% % % % 41 Type of Nuclear % % % % 471 Family Joint % % % % 293 Gross <= % % % % 220 Family % % % % 272 Income % % % 8 5.1% > % % % % 115 Cylinder are Consumed in a year Up to % % % % % % % % 146 More than % % % % 54 Total % % % % 764 Subsidized LPG means cylinders are provided at less price then these should be, which ultimately results in misuse of cylinders and on the other way around they result in over consumption of cylinders as shown in table 4.2. A fair proportion from household sector disagree with the statement i.e. almost 49% respondents disagree with the statement that subsidies on LPG results in over consumption of cylinders. From industry sector 66% agree to the statement in question. In relation with the age factor, a fair majority of 48% respondents disagree from less than or equal to 30 age group, and same is the case with the respondents from age group, a very high majority of 57% respondents disagree from 93

15 greater than or equal to 61 age group with the statement that subsidized cylinders result in over consumption of cylinders revealing the fact that cylinders are used at the time of need only whether they are subsidized or non subsidized. In relation with the state factor, there is significant difference (p=.042) between the opinions of respondents. In Punjab, majority of 45.8% respondents agree to the statement, and majority of 53.7% respondents disagree from Chandigarh. From the type of family factor, majority of 42.3% respondents agree from Nuclear family and majority of 44.7% respondents agree from Joint Family. From the gross family income factor, respondents of different income categories share the same view, meaning that there is no significant difference in their opinions regarding the statement. The respondents who consume less than 15 cylinders in a year agree more with the statement as compared to the respondents who consume more than 15 cylinders in a year. Table 4.2(a) Pearson Chi-Square Tests Chi-square Df Sig. Household/Industry Age State * Type of Family Gross Family Income Cylinder consumed in a year Only state represents the significant difference in opinions that subsidies on LPG results in over consumption of cylinders as shown in table 4.2(a) Christopher j. Holton also proved the same thing in his dissertation report that subsidies have damaging impact on two fronts such as distortion of market of that good which is subsidized to such an extent that it is over consumed and on the second side it has negative externalities. Table: 4.3 LPG Subsidies are becoming Wasteful with Excessive Consumption of LPG Answer Strongly Disagree Agree Strongly Agree Total 94

16 Disagree Household/ Household % % % % 698 Industry Industry 6 9.1% % % % 66 Age <= % % % % % % % % % % % % % % % 6 5.7% 106 >= % % % 0 0.0% 21 State Punjab % % % % 454 Haryana % % % % 269 Chandigarh % % % % 41 Type of Nuclear % % % % 471 Family Joint % % % % 293 Gross <= % % % % 220 Family % % % % 272 Income % % % 7 4.5% > % % % % 115 Cylinder are Consumed in a year Up to % % % % % % % % 146 More than % % % % 54 Total % % % % 764 Looking at the mean value in the table 4.3 it is shown that the majority of respondents from household 43.4% disagree and industry 56.1% agree that LPG subsidies are becoming wasteful with the excessive consumption of LPG. From the age factor, majority of 43% respondents from age less than or equal to 30 and majority of 42.9% respondents disagree from greater than or equal to 61 age group with the statement. From the state factor, only 34% respondents agree from Chandigarh and 43% from Punjab. Almost 50% respondents from each category of family type disagrees with the statement that LPG subsidies are becoming wasteful with excessive consumption of LPG. Table 4.3(a) Pearson Chi-Square Tests values for excessive Consumption of LPG Chi-square Df Sig. Household/Industry

17 Age State Type of Family Gross Family Income * Cylinder consumed in a year Gross family income have significant impact (p=.048) on the consumer perception. Almost of 45.9% respondents disagree from less than or equal to Rs income, majority of 45.2% respondents agree from Rs income, majority of 51.0% respondents disagree from Rs income, and majority of 43.5% respondents agree from greater than or equal to Rs income age group with the statement. Using chi-square test, for household/industry, age, state, type of family and cylinders consumed in a year there is non-significant difference between the opinions of respondents for LPG subsidies are becoming wasteful with the excessive consumption of LPG. On rich people ground, this statement can be true to some extent as they sometimes misuse subsidized cylinders but Vivien Foster proved in his study that poor make limited use of energy even after getting it at lesser price. Due to huge difference in the price of commercial and domestic cylinders, subsidized LPG cylinders are used commercially in hotels or stalls etc as shown in table 4.4 a. Using chi square tests, various significant values show that there is no significant difference among the opinions of different categories respondents. 65% respondents from household sector and 53% respondents from industry sector agree to the statement. Table: 4.4 LPG cylinders are used Commercially such as in cars, hotels or stalls etc. Answer Strongly Disagree Disagree Agree Strongly Agree Total Household/ Household % % % % 698 Industry Industry 5 7.6% % % % 66 Age <= % % % % % % % % % % % % % % % % 106 >= % 2 9.5% % % 21 State Punjab % % % %

18 Type of Family Gross Family Income Cylinder are Consumed in a year Haryana 8 3.0% % % % 269 Chandigarh 4 9.8% 3 7.3% % % 41 Nuclear % % % % 471 Joint % % % % 293 <= % % % % % % % % % % % % > % % % % 115 Up to % % % % % % % % 146 More than % % % % 54 Total % % % % 764 Respondents from different age categories also show significant difference in their opinions. Majority of 73% respondents from age agree to the statement whereas only 5% respondents from less than 30 age category strongly disagree to the statement. Respondents from different state show significant difference (p=.040) among the opinions of respondents. In Punjab 19% respondents strongly agree with the statement while in Chandigarh this proportion is just 12%. Gross family income does not have major impact on the respondents opinion regarding LPG cylinders are used commercially such as in cars etc. almost 65% respondents from each category of income agree with the statement. 65% respondents who consume 12 cylinders in a year agree with the statement and same is the case with the respondents who consume cylinders in a year. Table 4.4(a) Pearson Chi-Square Tests Chi-square Df Sig. Household/Industry Age State * Type of Family Gross Family Income Cylinder consumed in a year

19 Consumption of cylinders have no significant impact on the respondents view about the statement revealing that majority of the respondents agree with the statement that LPG cylinders are used commercially such as in cars, stalls, hotels etc. Table: 4.5 Removal in Subsidies will decrease the Misuse of LPG significantly Answer Strongly Disagree Disagree Agree Strongly Agree Total Household/ Household % % % % 698 Industry Industry 6 9.1% % % % 66 Age <= % % % % % % % % % % % % % % % % 106 >= % % % 1 4.8% 21 State Punjab % % % % 454 Haryana % % % % 269 Chandigarh 3 7.3% % % 4 9.8% 41 Type of Nuclear % % % % 471 Family Joint % % % % 293 Gross <= % % % % 220 Family % % % % 272 Income % % % 9 5.7% > % % % % 115 Cylinder are Consumed in a year Up to % % % % % % % 9 6.2% 146 More than % % % 4 7.4% 54 Total % % % % 764 Table 4.5(a) Pearson Chi-Square Tests values for reduction in misuse of LPG Chi-square Df Sig. 98

20 Household/Industry * Age State Type of Family Gross Family Income Cylinder consumed in a year Removal in subsidy on LPG will increase the price for cylinders which will help in reducing the misuse of LPG cylinders as shown in the table 4.6. More than 50% of the respondents are of the opinion that removal in subsidies on LPG will decrease the misuse of LPG significantly. A fair majority of 48% respondents from household sector and 45%respondents from industry sector agree with the statement. Age does not have any significant impact on the opinions of the respondents. Respondents from different family system have almost same perception towards the removal of subsidies. Respondents with different gross family income do not have significant impact on the perception regarding the removal of subsidies. Almost 50% respondents from each category of income agree with the statement. Results are found to be in significant except the comparative value for household/industry where sig. value (.023 <.05) represents that there is significant difference at 5 percent level of significance between the opinions of respondents for removal in subsidy of LPG will decrease the misuse of LPG significantly. Tim Boersma and Steve Griffiths proved in their publishing on the topic Reforming Energy Subsidies- Initial lessons from the United Arab Emirates in January 2016 that with the increase in the prices of subsidized goods or removing subsidies can help in decreasing the misuse of that good. With significant increase in the price of water and electricity in UAE, the consumption of water and electricity was decreased by 3% and 7% by industrial units respectively. Table: 4.6 Proper Identification of Beneficiary using LPG may Result in Decreasing LPG Misuse Answer 99

21 Strongly Disagree Disagree Agree Strongly Agree Total Household/ Household % % % % 698 Industry Industry 2 3.0% % % % 66 Age <= % % % % % % % % % % % % % % % % 106 >= % % % % 21 State Punjab % % % % 454 Haryana 6 2.2% % % % 269 Chandigarh 4 9.8% 3 7.3% % % 41 Type of Nuclear % % % % 471 Family Joint % % % % 293 Gross <= % % % % 220 Family % % % % 272 Income % % % % > % % % % 115 Cylinder are Consumed in a year Up to % % % % % % % % 146 More than % % % % 54 Total % % % % 764 Table 4.6(a) Showing significant values for identification of beneficiaries Chi-square Df Sig. Household/Industry * Age State Type of Family Gross Family Income Cylinder consumed in a year LPG is targeted towards the poor and middle income people. If these targeted beneficiaries are properly identified then misuse of LPG can be reduced as shown in table 4.6. Around 70% of the general public is of the view that proper identification of beneficiaries may reduce the LPG misuse. Looking at the mean value it is referred that the majority of respondents 100

22 from household 63.2% and industry 62.1% agree that proper identification of beneficiary using LPG may result in decreasing misuse. using chi-square test, for household/industry, sig. value (.033 <.05) represents that there is significant difference at 5 percent level of significance between the opinions of respondents for proper identification of beneficiary using LPG may result in decreasing misuse. Lawrence Nortron et.al. in one of their study on the basis of their reform experiences in LAC countries in 2015 proved that reforms should be gradual and well targeted with the mitigation measures to the most vulnerable and to the groups most affected by the reforms revealing the fact that proper identification of beneficiaries using LPG may result in decreasing LPG misuse. In September 2012, government introduced a cap of 6 subsidized cylinders per annum. In January 2013, this number was increased to 9. In January 2014, this quota was further increased to 12. It is assumed that quota fixation of cylinders will decrease the misuse of cylinders by well off consumers. From table 4.9 it is clear that the majority of respondents from household 59.3% and industry 59.1% agree that quota fixation of subsidized LPG might reduce misuse of cylinders by well off consumers as shown in table 4.7 below: Table: 4.7 Quota Fixation of Subsidized LPG might reduce misuse of cylinders by well off consumers Answer Strongly Disagree Disagree Agree Strongly Agree Total Household/ Household % % % % 698 Industry Industry 1 1.5% % % % 66 Age <= % % % % % % % % % % % % % % % % 106 >= % % % 0 0.0% 21 State Punjab % % % % 454 Haryana 8 3.0% % % % 269 Chandigarh 3 7.3% % % % 41 Type of Nuclear % % % % 471 Family Joint % % % % 293 Gross <= % % % % 220 Family % % % % 272 Income % % % %

23 Cylinder are Consumed in a year > % % % % 115 Up to % % % % % % % % 146 More than % % % 4 7.4% 54 Total % % % % 764 Table 4.7(a) Pearson Chi-Square Tests values for quota fixation Chi-square Df Sig. Household/Industry Age * State Type of Family Gross Family Income Cylinder consumed in a year However, results shown found to be insignificant except the age factor where sig. value (.026 <.05) represents that there is significant difference at 5 percent level of significance between the opinions of respondents for receiving cylinders at the market rate and getting subsidy in your bank account is beneficial. Although for household/industry, state, type of family, gross family of income and cylinders consumed in a year there is non-significant difference between the opinions of respondents for quota fixation of subsidized LPG might reduce misuse of cylinders by well off consumers. The second issue with the poor people discussed in the publishing of Shruti Sharma was that they had to limit their LPG consumption due to its increased price and quota fixation and they replaced it with firewood and other bio mass for some heating and cooking purpose revealing the fact that quota fixation have negative impact on the poor and needy people. Table: 4.8 Replacing Expensive Subsidies may reduce the Misuse of Subsidies Answer Strongly Disagree Disagree Agree Strongly Agree Total 102

24 Household/ Household % % % % 698 Industry Industry 5 7.6% % % % 66 Age <= % % % % % % % % % % % % % % % 8 7.5% 106 >= % % % 0 0.0% 21 State Punjab % % % % 454 Haryana % % % % 269 Chandigarh % % % 2 4.9% 41 Type of Nuclear % % % % 471 Family Joint % % % % 293 Gross <= % % % % 220 Family % % % % 272 Income % % % 8 5.1% > % % % 7 6.1% 115 Cylinder are Consumed in a year Up to % % % % % % % 5 3.4% 146 More than % % % 3 5.6% 54 Total % % % % 764 Table 4.8(a) Pearson Chi-Square Tests values for replacement of subsidies Chi-square Df Sig. Household/Industry * Age State * Type of Family Gross Family Income Cylinder consumed in a year Using chi-square test, for household/industry, sig. value (.008 <.01) represents that there is significant difference at 1 percent level of significance, for state, sig. value (.000 <.01) represents that there is significant difference at 1 percent level of significance between the opinions of respondents for replacing expensive and regressive subsidies may reduce the misuse of LPG cylinders. Majority of 30% respondents disagree with the statement while this 103