28 consumption of 10 kg per household with four members; and 4 percent of total monthly household expenditure spent on LPG.

A doubling of income in a decade would require an annual growth rate of 7 percent in real terms. At the national level, very few countries have achieved such robust growth in household income. There are individual households within each country that have achieved an increase in income of this magnitude, and they are more likely to be urban than rural. That said, there are situations where retail prices could be markedly lower than those shown in the figure. If there is no easy way of exporting LPG, export-parity prices and hence the market-clearing prices of LPG could be considerably lower than world prices (provided that net-of-tax prices are adequate for full cost recovery and a reasonable profit margin), making the minimum monthly income needed for regular use of LPG correspondingly lower than in Figure 4. There are also regional differences. The U.S. retail prices were higher than those in the figure between November 2008 and April 2009, but have been lower since, for example by about 20 percent in 2010.

To promote access to modern energy services, some governments have been providing price subsidies for LPG for household use. These subsidies tend to be universal and hence regressive (World Bank 2010a, table 6). Recent run-ups in world prices have led to mounting burdens on government finance (Kojima 2009). If such financial assistance is to be provided, capital subsidies (subsidies for start-up costs) are generally acknowledged to be better than operating-cost subsidies (such as fuel or power tariff subsidies), but only if the consumers can pay for the operating costs themselves so that a viable energy market can develop. In this regard, there are important differences between electricity and fuels. For electricity, the initial connection cost is orders of magnitude higher than monthly operating costs. At the same time, those without electricity are typically already paying cash for much inferior alternatives—such as kerosene for lighting or batteries—and that cash can be redirected to pay partially or fully for electricity. For LPG, the difference between the initial start-up cost (US$40–60 for a stove and the cylinder deposit) and the operating cost paid for cylinder refills (US$12 a month at today’s prices in the above illustrative example) is considerably smaller, while the operating costs themselves are sufficiently high to present a barrier to regular use of LPG by low-income families. Further, many among low-income families may be paying no cash for cooking and heating fuels and hence have no cash to redirect toward LPG purchase. Under these circumstances, it is not clear that capital subsidies would be pro-poor. It may be argued that households who can reasonably afford the LPG refill cost of US$10–15 a month are capable of paying US$40 to start the service; it may also be argued that, for these households, other financial arrangements, such as recovery of start-up costs through the cost of refill, may be more appropriate.

Targeted capital-subsidy schemes for fuel use are rare but there have been such schemes in developing countries. For example, the state government of Andhra Pradesh in India in 1999 launched the Deepam Scheme to promote the use of LPG by the poor to reduce the drudgery of biomass collection and cooking, improve health, and slow deforestation. Under the scheme, the government covered the cylinder connection fee for starting LPG service to those families classified as being below the poverty line. An assessment of the Deepam Scheme completed by the World Bank in 2002 found that the scheme clearly facilitated the uptake of LPG by the rural poor. However, biomass remained the main cooking fuel for the majority of Deepam