59 India has transformed LPG subsidies from price subsidies to conditional cash transfers. To contain growing subsidies, the central government initially limited the number of refills at heavily subsidized prices sold in 14.2 kg cylinders to six a year in September 2012. Refills above the limits were to be purchased at non‐subsidized prices. The government was not able to withstand the political pressure to increase the limit, raising it from six to nine in January 2013, and from nine to twelve in January 2014.

Even non‐subsidized LPG sold in 14.2‐kg cylinders appears to be cross‐subsidized. There are large economies of scale in transporting, storing, and bottling LPG. As a result, the unit price should decrease with increasing cylinder size. However, as Table 12 shows, LPG sold in 19‐kg cylinders has consistently been more expensive per kg than that sold in 14.2‐kg cylinders, a pattern that would not be expected in a completely deregulated market. This trend continued for the rest of 2015. The subsidized price used to calculate the cash transfer remained fixed for the entire year in 2015, and in fact has not changed much since June 2011.

**Table 12: LPG prices in New Delhi in April 2015**

|Cylinder size|14.2 kg (subsidized)|14.2 kg (non-subsidized)|19 kg|
|---|---|---|---|
|Rs/kg|29.37|43.73|60.11|
|US$/kg|$0.47|$0.70|$0.97|

_Source_ : World Bank staff calculations based on data at http://www.iocl.com/Products/Indanegas.aspx.

The government has been issuing a 12‐digit individual identification number called Aadhaar to every resident. Aadhaar is based on demographic and biometric information and serves as proof of identity and address. The government initially planned to launch a conditional cash transfer program for LPG by linking the transfer of LPG subsidies to the Aadhaar number in a scheme called the Direct Benefits Transfer for LPG (DBTL). The DBTL was launched on June 1, 2013 and eventually covered 291 districts, but was challenged in the Supreme Court, which ruled that the government could not make Aadhaar mandatory for receiving LPG subsidies because not everyone had been issued with an identity number. As a result, the government suspended the DBTL temporarily.

The government modified the DBTL and re‐launched it in 54 districts on November 15, 2014, and nation‐ wide on January 1, 2015. There are two ways of applying for subsidies, the first of which is to link an Aadhaar number to a bank account and the second of which is to provide banking details if a beneficiary does not yet have an Aadhaar number. Each beneficiary provides a 17‐digit LPG customer number to his or her bank and on the application form. The cash transfers are not targeted and everyone, no matter how wealth, is eligible. However, the Ministry of Petroleum and Natural Gas initiated a “#GiveItUp” campaign (http://www.givitup.in/), urging those who can afford LPG to give up the subsidy voluntarily.

The government designed the final phase of the national launch of the DBTL as follows. All consumers were to pay market prices after February 14, 2015. Those who have signed up for DBTL have price subsidies deposited in their bank accounts. The government would stop selling subsidized LPG altogether on February 15, removing an important source of market distortions and commercial malpractice (whereby businesses illegally purchase subsidized LPG, intended only for households). LPG consumers who applied for the scheme on or before May 14 could have subsidies transferred to their bank accounts retroactively. Starting on May 15, 2015, LPG is sold at market prices and the only way to receive subsidies is to become “cash‐transfer compliant” by officially enrolling in the DBTL. As of