Doctor En Economía

Short articles

LPG subsidies in Brazil:
an estimate

2. LPG pricing
Brazil practiced a cross-subsidy scheme for several decades in order to make LPG affordable to households in
all parts of the country. Funds were collected from sales
of various petroleum derivatives whose final consumer
prices were administered by the central government and
were uniform across the country. The pricestructure was
composed of four main categories: production costs paid
to the refining company, a fuel fund (called PPE until
2001 and now known as CIDE), fiscal and sales taxes
and lastly the distribution margin costs. In May 2001 enduser prices for LPG were liberalized as a part of a gradual
process of deregulating the petroleum sub-sector.
As LPG prices were deregulated and collectivesubsidies to all customers were eliminated, the federal government started implementing a policy to assist low-income
families to purchase the gas through a voucher valued at
R$[2] 7.5 (US$ 2.38) per month per family. Unlike under
the previous subsidy system, which subsidized every LPG
user, the new program benefits are available only to families with a monthly income per capita that is no morethan half the minimum-wage income[3].

Gilberto M. Jannuzzi[1]
Universidade Estadual de Campinas-UNICAMP, CP 6122
CEP 13083-970 Campinas, São Paulo, Brazil
E-mail: jannuzzi@fem.unicamp.br
Godfrey Alois Sanga
IEI Latin American Office, Rua Shigeo Mori, 2013, CEP
13084-082, Campinas, São Paulo, Brazil
1. Introduction
Liquefied petroleum gas (LPG) is accessible to more than
98 % ofhouseholds in Brazil according to the last household survey by the Institute of Geography and Statistics
of Brazil in 2002. It has a slightly higher penetration than
electricity which had reached 97 % of the 46.5 million
households. Penetration of LPG in the rural areas is also
remarkable; 93 % of rural households use LPG. In 2002
LPG consumption in the household sector reached 10 million (M) m3.This short note intends to estimate the amount of LPG
subsidies given in Brazil in the past decades. These subsidies, in our view, are one of the main reasons explaining
the high penetration of this fuel in the household sector.
Removal of the price subsidy from LPG in January
2002 resulted in an immediate increase of 17 % in the
average retail price and a decrease of 5.3 % in the household LPGconsumption in 2002 equivalent to 9.3 PJ
[MME, 2003]. In the same period the household consumption of natural gas increased from 140,000 m3 to 179,000
m3, equivalent to 1.4 PJ.
The percentage share of the household sector in the total
LPG consumption, which had increased at the rates of
3 % and 4 % for two consecutive years, 2000 and 2001,
decreased from 82 % in 2001 to 70 % in 2003 [ANP,2004]. The sudden fall in household consumption is evidence of the impacts of price increases, although there
could be other factors such as an increase in the use of
natural gas, changes in food preparation and eating habits,
or improvements in the efficiency of gas stoves. From the
paragraph above, however, it can be observed that the use
of natural gas replaced only 16 % of the LPG duringthe
period under consideration.
Moreover, unlike the other factors, price changes normally have an immediate impact on fuel consumption pattern; other factors may have influenced fuel consumption
more gradually over time. Information on the other factors
is hardly available and quantifying impacts of these factors would require further field surveys. It is also worth
noting that in Brazil theuse of LPG in 13-kg bottles destined for household use is prohibited for use in automotive
and other sectors such as industrial and commercial, although it cannot be ignored that a portion of this fuel
might have had non-household uses during the period under consideration.
Energy for Sustainable Development

3. Estimations of the amount of subsidy to LPG
By subsidy we mean here any...