Can Subsidies be a Tool for Strengthening the Improved Cookstoves Market?

The Unnat Chulha Abhiyan (National Biomass Cookstoves Programme) has set an ambitious target of deploying 2.75 million improved biomass cookstoves in the 12th Five-Year Plan Period, with a plan outlay of `294 crores.1 One of the financial provisions of the programme is to subsidize up to 50 per cent of the cost of the stove2, with an additional 10 per cent of the total cost paid to masons for construction of earthen stoves. Subsidies have an undeniable role in supporting the nascent improved biomass cookstoves market, with majority of the buyers having low paying capacities. However, imprudent subsidization of improved cookstoves may distort the market by devaluing the product, discourage uptake of the stove once subsidies dry up, and may lead to leakage or misdirection of programme funds. Subsidization was one of the policy mechanisms for deployment of improved cookstoves in the erstwhile National Programme for Improved Cookstoves-with discouraging results.3 Long-term success of government-run improved cookstove programmes can be gauged by viability of the market created for improved cookstoves after the programme's closure.4 Utilizing subsidies as a policy mechanism for deployment of improved cookstoves requires striking a balance between strengthening the improved cookstoves market and enhancing the affordability of the product through subsidization.