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Case Code: CLECO001
Case Length: 6 pages 
Period: -  
Pub Date: 2015
Teaching Note: Not Available
Subject : Economics
Organization :-
Industry : -
Countries : -

LPG Subsidy Dilemma in India



The LPG subsidy policy of the Indian government was caught in the regulated vs. deregulated price regime debate, as the policymakers sought to balance the twin objectives of providing subsidized LPG to the needy with controlling the burden on the public exchequer. LPG being an essential commodity was subsidized by the government to help the people in general and the poor in particular so that they could benefit from it, but the economically advantaged people were proactive in garnering the benefits of the scheme...
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  • Understand the demand and supply model of LPG in India.
  • Understand the subsidy issues related to LPG pricing in India.
  • Analyze the price change impact of LPG on other related essential consumer products, as guided by the ‘Law of Demand.
  • Understand the mechanisms for standardizing the subsidy administration in India.
  • Explore the strategies that would help strike a balance between LPG subsidy and financial burden on the government exchequer.
As on March 1, 2015, 63 percent of Indian consumers had access to a Liquefied Petroleum Gas (LPG) connection to cater to their cooking energy needs. LPG was highly subsidized by the Government for the benefit of the poor. However, the subsidy benefits were mostly cornered by a handful of economically well-off urban households, as a result of which the underlying objective of the subsidy program was at stake in India. On March 27, 2015, Narendra Modi, the Prime Minister of India, launched the LPG subsidy ‘Give It Up’ campaign. The objective of the campaign was to induce the better off sections of society to forgo their LPG subsidy so that it could be put to better use for the poor. Within four months of the launch of the campaign, more than 1 million consumers had given up their subsidies, in the process helping the Government save Rs.1400 million which could be used to fund developmental projects for the nation..


Law of demand, Demand and supply model, Determinants of demand, Subsidy; Subsidy policy, Regulated vs. deregulated price regime, Budget deficit, Controlling costs, Price change impact, Subsidy impact, managerial economics, Price control, LPG

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