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The case for smart payments in India’s public finance future

Posted on by Saumya Dixit

India’s public finance system has saved ₹26,000 crore in interest costs through reforms like TSA and SNA-SPARSH, enabling near real-time fund release. Yet, actual payments to beneficiaries often face delays due to manual approvals. Odisha’s pilot of a Smart Payment System under its MUKTA scheme offers a glimpse into the future — combining JIT fund release with rule-based automation. Scaling this model nationwide can eliminate delays, reduce administrative burden, and build trust in public service delivery. The next leap: real-time, algorithm-triggered payments that ensure transparency, efficiency, and last-mile impact in governance.

During her address at the 49th Civil Accounts Day on March 1, Finance Minister Nirmala Sitharaman underscored a landmark achievement in India’s public finance management — a savings of approximately ₹26,000 crore in interest costs since 2017-18. This remarkable feat has been enabled by the implementation of the Treasury Single Account (TSA) and the Single Nodal Agency (SNA) models, which have fundamentally restructured the government’s approach to fund disbursement.

At the heart of this transformation lies the shift to the SNA system for Centrally Sponsored Schemes (CSS), which has consolidated banking arrangements, curtailed idle funds (float) in bank accounts, and enhanced transparency in fund utilization. The subsequent transition to SNA-SPARSH (System for Payments and Reporting Across Sectors Holistically) has taken this evolution a step further — bringing the system closer to a true Just-In-Time (JIT) model of public expenditure.

The traditional model of credit or push-based fund release, where funds were disbursed in advance to implementing agencies, has now given way to a debit or pull-based system under SNA-SPARSH. In this framework, a debit to the Central Pool occurs only when an implementing agency issues a payment instruction, effectively pulling funds in real-time from the TSA to the end beneficiary’s account. This has significantly reduced the float across thousands of government bank accounts and, in doing so, has lowered the government’s borrowing requirements and associated interest burdens.

However, while SNA-SPARSH has enabled real-time fund release, the vision of real-time payments — the holy grail of JIT public finance — remains just out of reach. A critical time lapse still exists between the completion of work, the generation and uploading of payment files, and their subsequent approval. This delay in the final step of disbursing funds impacts frontline service delivery, particularly in vital sectors such as health, education, nutrition, and infrastructure.

The recent case in Haryana, where 600 private hospitals temporarily suspended services under the Ayushman Bharat scheme due to delayed payments, illustrates the fragility of outcomes when payment timelines falter. Although services resumed following government assurances, the incident underlines the urgent need for a more responsive, intelligent system of public payments.

Enter the Smart Payment System — a next-generation framework that builds on the successes of SNA-SPARSH but adds the critical layer of automation and algorithmic intelligence to achieve real-time, rule-based payments.

The Smart Payment System will rest on two foundational pillars:

  • Efficient Fund Release: Leveraging SNA-SPARSH’s ability to pull funds directly from the treasury to the beneficiary’s bank account, ensuring a zero-float system.
  • Efficient Payment Processing: Introducing real-time fund disbursement, triggered by algorithmically defined rules when predefined conditions are met, without human intervention.

For instance, under the Ayushman Bharat scheme, once a patient’s treatment is completed and verified by the State Health Authority’s claim processing doctor, the system should automatically trigger payment to the hospital. In infrastructure projects, once an engineer validates that the required work has been completed, the system should instantly initiate the payment, again, without the need for manual processing.

Such a smart system not only ensures fiscal discipline and transparency but also strengthens the last-mile impact of public expenditure. By eliminating delays and minimizing discretion, it can build trust among stakeholders, from hospitals and contractors to citizens, and ensure that government spending truly delivers on its promise.

As India continues to digitalize its governance and public finance architecture, the Smart Payment System could represent the next great leap forward — one that brings governance closer to real-time accountability, efficiency, and service delivery.

India’s public financial management has undergone a quiet but powerful transformation in recent years. From the introduction of the Treasury Single Account (TSA) to the rollout of the Single Nodal Agency (SNA) model and its advanced iteration, SNA-SPARSH, the country is steadily moving towards a Just-In-Time (JIT) funding regime. These reforms have already yielded significant dividends — ₹26,000 crore saved in interest costs since 2017-18 — by curbing idle funds and tightening fiscal discipline.

Yet, while fund release has reached near real-time through SNA-SPARSH, fund disbursement — the actual payment to beneficiaries upon completion of services — continues to suffer from procedural delays. Payments often lag due to the time it takes to generate, upload, and approve payment files, even after work has been verified. This gap undermines the potential of these financial innovations and affects real-world outcomes in sectors such as health, nutrition, and infrastructure. The recent impasse in Haryana, where private hospitals suspended services under Ayushman Bharat due to delayed payments, highlighted this critical bottleneck.

Fortunately, the solution may already be within reach.

One such promising model is emerging from the state of Odisha, which is piloting a smart payments ecosystem for its MUKTA scheme — a flagship urban wage employment initiative launched during the COVID-19 pandemic and now part of the Mukhyamantri Sahari Vikas Yojana. The program initially grappled with several familiar challenges: delayed wage payments, idle funds, and administrative inefficiencies.

To address these, the Odisha government has engineered a two-pronged system:

  • A Just-In-Time fund release mechanism for the State Finance Department, enabling Urban Local Bodies (ULBs) to pull funds directly from the state’s consolidated fund.
  • A rule-based payment processing platform called MUKTASoft, developed for the Housing & Urban Development Department.

Together, these components allow ULBs to transfer funds directly to beneficiaries, including wage-seekers, Self-Help Groups (SHGs), and vendors, the moment payment conditions are met. The system is designed to autonomously trigger payments based on preset rules, significantly reducing manual intervention and easing the administrative burden on local officials.

Now being piloted in 23 of the state’s 149 ULBs, early indicators are promising: the project has effectively eliminated idle fund parking and cut payment delays by 57%. These are not just efficiency improvements — they are tangible enhancements in governance and service delivery.

Odisha’s smart payment model offers a glimpse into the future of public payments in India. By integrating rule-based algorithms into the SNA-SPARSH framework, the Government of India can unlock the next stage of reform — one where payments are not only just-in-time but also just-in-context.

Imagine a system where, once a hospital successfully treats a patient under Ayushman Bharat and a doctor certifies the claim, the payment is instantly credited — no paperwork, no waiting. Or where, upon an engineer’s digital verification of a completed infrastructure milestone, contractor payments are auto-triggered. This isn’t a far-off dream — it’s a logical next step built on the foundation already laid by TSA, SNA, and SPARSH.

The call to action is clear: the central government should consider a final, focused reform of the SNA-SPARSH system — one that adds autonomous, rules-based payment processing. By doing so, it can complete the JIT payments architecture, reduce administrative overhead, and ensure beneficiaries and vendors are paid swiftly and fairly.

As these reforms scale, India could soon emerge as a global exemplar in digital public finance, where governance is lean, responsive, and citizen-centric.

This op-ed was first published on etedge-insights on the 22nd of April, 2025

Galvanizing climate resilience through locally-led adaptation: Lessons from India’s most vulnerable communities

Posted on by Deepesh Singh

In the remote hills of Odisha, India, Meena Juang surveys her drying crops. “We already face water shortages throughout the year,” she explains. “Low rainfall only makes the situation worse.” Across India, particularly vulnerable tribal groups (PVTGs) find themselves on the frontlines of climate change with limited resources to adapt. Over 3.3 billion people live in areas of high climate vulnerability, and indigenous and marginalized communities bear the heaviest burden.

Locally-led Adaptation (LLA) offers a paradigm shift. Unlike top-down interventions, LLA empowers communities to design solutions rooted in their lived experiences and local knowledge. As one Sahariya tribe elder noted, “We know the land’s pain—we’ve seen the rains vanish and the crops wilt. Yet no one asks us how to fix it.” MSC’s LLA community-level toolkit bridges this gap to transform communities from beneficiaries to architects of resilience.

Overview of MSC’s LLA toolkit

The LLA community-level toolkit embodies the eight principles for locally led adaptation endorsed at the 2021 Climate Adaptation Summit. It provides a participatory framework designed to help communities assess hazards and risks, prioritize actions, and develop adaptation plans. The toolkit can be used in diverse ecosystems. MSC has used it from the drought-prone plains of Rajasthan to the flood-affected forests of Jharkhand. It is designed explicitly to be inclusive and give voice to communities through visual mapping, games, and structured discussions.

The toolkit in action

Preparation is key to the toolkit’s effective implementation. Extensive secondary research is vital to understand the nature of climate risks and past activities in the locality. This requires a deeper look at three areas.

  1. Current climate hazards and impacts and those expected under different representative concentration pathways (RCPs) and, where available, shared socioeconomic pathways (SSPs). This knowledge will be imperative to inform the respondents about future climate scenarios.
  2. Ongoing national and local government, and where appropriate private sector, planning and responses to climate change, including policies and regulatory provisions. These are vital to inform respondents about adaptation options that can lead to a positive impact.
  3. The availability of formal and informal financial services in the area. This is key to assessing options to fund and implement adaptation plans developed using the toolkit.

Extensive knowledge of these three areas will enable moderators to guide the participants effectively as they use the toolkit to develop their adaptation plans. The toolkit itself comprises six sequential tools designed to be implemented through participatory workshops with diverse community members:

1) Mapping of climate hazards and exposure: Communities use this tool to create visual maps of their area to identify climate-hazard-prone zones and track how hazard patterns have changed over time. The Korwa tribe in Jharkhand, for instance, mapped how monsoon rainfall has decreased while temperature extremes have intensified, affecting crop cycles and forest productivity.

2) Assessment of vulnerability: Using DFID’s Sustainable Livelihoods Framework communities evaluate their five capitals (human, social, natural, physical, and financial) to identify strengths and weaknesses in their adaptive capacity. This reveals critical shortfalls—such as the Korwa tribe’s limited financial capital and the Sahariya tribe’s deteriorating natural resources—while highlighting assets that can be mobilized.

3) Identification of climate-related risks: Participants then analyze how climate hazards interact with vulnerabilities to create direct and indirect impacts. For example, the Korwa tribe mapped how extended dry spells reduce water availability, livestock health, and crop and forest yields, which compounds challenges and compromises household finances.

4) Developing adaptation options: Using innovative methods like modified “snakes and ladders” games, communities brainstorm potential adaptation strategies. This gamification helps participants visualize risks (snakes) and solutions (ladders) in an engaging, accessible format, regardless of literacy levels. Korwa tribe members identified various adaptation options that spanned road and house construction, improved water management systems, and agricultural extension.

5) Prioritizing adaptation strategies: Communities evaluate potential adaptation options based on availability (is it technically feasible?), accessibility (can we implement it?), and affordability (can we sustain it?). This ensures that final plans reflect realistic, context-appropriate solutions rather than wishful thinking. The Korwa tribe prioritized the construction of pucca houses that do not leak during heavy rainfall and improved drinking water facilities for agricultural and personal consumption during the increasingly hot dry season.

6) Creating a community adaptation plan (CAP): The process culminates in a detailed action plan that specifies activities, milestones, timelines, costs, funding sources, and responsible stakeholders. The CAP brings together different discussion threads that emerged from the deliberations and transforms them into a concrete roadmap for implementation.

Benefits of MSC’s LLA toolkit

The LLA toolkit offers several distinct advantages for those seeking to enhance climate resilience among vulnerable communities:

  • Indigenous knowledge meets scientific understanding: The toolkit enables the combination of traditional knowledge with accessible explanations of climate change science. This is essential for the development of technically sound adaptation strategies that are culturally suitable in the context of locally embedded models.
  • Complex climate planning becomes accessible: Climate change adaptation involves complex environmental, social, and economic interactions. The toolkit’s approach breaks this complexity into manageable components to enable people to participate meaningfully regardless of their technical expertise or formal education levels.
  • Builds communities’ capabilities: The implementation process enables and encourages participants to think through the implications of the unfolding climate crisis and how they can respond to it.
  • Adaptability across contexts: The toolkit’s principles can be applied across diverse geographic and cultural contexts. We are already applying them in Bangladesh, Uganda, India, and Indonesia in MSC’s new LLA for MSMEs toolkit. This toolkit’s participatory, game-based approaches and visual mapping techniques transcend literacy barriers and can easily be adapted to local conditions.
  • Community ownership drives sustainability: When communities lead the identification of adaptation options, they develop greater commitment to implementation and maintenance. This starkly contrasts with externally imposed solutions that often fail once project funding ends. As demonstrated by the Juang tribe’s enthusiasm for the check dams they helped design, locally-led initiatives create stronger buy-in.
  • Integration with existing governance systems: The toolkit complements rather than competes with formal planning mechanisms. In India, community adaptation plans can be integrated into Gram Panchayat Development Plans (GPDPs) to create formal resource allocation and implementation pathways. This integration enhances the legitimacy and sustainability of adaptation initiatives. MSC is now preparing to work with IDH and the local government of Madhya Pradesh to this end.
  • Actionable plans attract multi-stakeholder support: Effective coordination among the four key stakeholders is essential for an impactful community-based LLA initiative. Communities develop and own their adaptation plans alongside local government agencies, which ideally would integrate elements of these plans into their formal development agendas. Civil society organizations (CSOs) provide technical support and capacity building to the community, while financial institutions offer suitable financial services. Through the creation of specific, time-bound plans with clear responsibilities, communities can engage government agencies, CSOs, and financial institutions more effectively.

The detailed implementation pathways in the CAP create accountability mechanisms and reduce coordination challenges. They also ensure that community priorities receive adequate resources, technical support, and institutional backing to transform plans into sustainable action.

The path ahead

For practitioners who work with climate-vulnerable communities worldwide, the MSC’s LLA toolkit offers a proven methodology to transform abstract climate concerns into concrete, community-owned action plans. These plans help governments and private sector players to identify ideas more likely to have a positive impact and scale existing climate change adaptation initiatives. They also create avenues for sustainable financing of climate change adaptation initiatives. They encourage partnerships, particularly public-private partnerships (PPPs), to integrate climate adaptation solutions into existing businesses, such as microfinance, agribusiness, healthcare, education, and digital financial services.

Perhaps most importantly, the LLA process empowers communities to move from being passive victims of climate change’s effects to achieving active agency in their lives. As one participant reflected, “Before this process, we only talked about our problems. Now we find solutions together.”

Challenging the orthodoxy: Can we rethink finance for locally-led adaptation?

Posted on by Deepesh Singh

“… investments in adaptation and resilience-building around the world continue to fall far short of documented needs. It is also increasingly clear that although public finance for adaptation has increased, it will not suffice. Private sector investment is critical to closing the adaptation finance gap.” – The World Bank Group and the Global Facility for Disaster Reduction and Recovery (GFDRR) (2021).

The adaptation finance crisis

While countries worldwide have pledged to prioritize climate adaptation, the gaps between promises, delivery, and needs are alarming. Back in 2009, at the COP15 in Copenhagen, developed nations promised to set aside USD 100 billion each year by 2020 to help developing countries mitigate and adapt to climate change’s impact. At the COP29 in Baku, Azerbaijan, these promises were further escalated to USD 300 billion each year by 2035—but this depended on the involvement of private sector capital.

Yet, developed countries only contributed about USD 83.3 billion in 2023 toward climate finance for developing nations. Meanwhile, only USD 29–35 billion each year actually reached developing countries in 2022, with a meager 10–15% trickling down to local communities due to bureaucratic inefficiencies. Today, developing countries require USD 215–387 billion each year to adapt to escalating climate impacts—a figure that the Climate Policy Initiative estimates will balloon to USD 315–565 billion annually. Additionally, while public finance for climate adaptation has increased, private sector contributions remain extremely low—only about 3–5% of total adaptation finance.

The gap is not just financial but existential. If we are to close the gap, developed countries must honor and expand their commitments. They must use blended finance to crowd global and local private-sector funding.

Locally-led adaptation (LLA)

Locally-led adaptation (LLA) shifts agency from international donors and national governments to local communities, which enables them to define, design, and monitor adaptation actions. The approach recognizes that communities in regions, such as Sub-Saharan Africa and South Asia—where more than 60% of people rely on smallholder farming or informal enterprises—possess nuanced knowledge of hyper-local risks.

However, most traditional LLA approaches use a comprehensive, one-size-fits-all model, where local governments and communities design adaptation plans collaboratively. Yet, this comprehensive approach can gloss over the diverse financial capacities and structural needs of different actors—local governments, MSMEs, farmers, and vulnerable households.

While the global discourse acknowledges the importance of LLA, actual implementation remains hindered by structural inefficiencies, inadequate funding mechanisms, and top-down decision-making processes that marginalize local voices. As the IIED’s LIFE-AR notes, “The choice of delivery mechanism—local vs. higher-tier—depends on the stakeholder. MSMEs thrive with decentralized finance; infrastructure requires centralized coordination.”

We propose a differentiated model that tailors adaptation strategies to specific segments and enables complementary private-sector finance to support adaptation initiatives. The model draws on existing work under the ADB’s Country Risk and Policy Platform (CRPP) and UNCDF Local Climate Adaptive Living Facility (LOCAL) programs in Gambia, Ghana, and Uganda.

Strengths and gaps in the comprehensive model

The comprehensive LLA model has played a crucial role to shift adaptation decision-making to the local level through pioneering frameworks, such as the UNCDF’s LoCAL and IIED’s LIFE-AR initiative. These frameworks emphasize inclusivity and decentralized governance to ensure community voices shape adaptation investments.

However, the comprehensive approach typically fails to recognize that local government officials often struggle to identify, still less meaningfully engage with, very poor, climate-vulnerable communities. Furthermore, the extent to which local governments can effectively raise funds and reach the most climate-vulnerable populations varies significantly. Two major factors that underlie this are the capacity of local government officials and the size, structure, and mandate of local governments, many of which are prohibited from raising funds.

A segmented model for LLA

A more effective LLA model could be to recognize the very different types of stakeholders involved, as the IIED has clearly identified. This approach requires us to segment adaptation responses based on three key groups:

1) Local government—driving large-scale infrastructure

Local governments responsible for large-scale adaptation infrastructure, such as flood barriers, irrigation systems, and resilient transport networks, require long-term financing mechanisms alongside public sector oversight to implement these projects. This positions local governments as ideal recipients of institutional funding from sources, such as the Green Climate Fund (GCF) and development banks.

Governments can also tap into capital markets by issuing municipal bonds, an underutilized tool in most developing countries. A successful example of this approach is Nepal’s municipal green bonds under the Local Adaptation Plans of Action (LAPA) program supported by the ADB’s Community Resilience Partnership Program (CRPP), which has mobilized USD 15 million for flood resilience. This demonstrates how public financing tools can align with decentralized adaptation planning to ensure sustainable infrastructure development.

Case study: Kenya’s County Green Investment Facility

Based on its work on the County Climate Change Fund (CCCF) Mechanism, FSD Kenya commissioned the county green finance assessment, which provided the first analysis of the green assets and potential at the county level. This work demonstrated the vast potential for projects that can be developed to enhance climate resilience and provide opportunities for green finance. However, county governments require support to package these projects and ensure they manage risks effectively at the global, macroeconomic, national, and local levels.

Collaboration is required to bridge this gap and channel green finance to communities through a pipeline of investable projects that align with investor expectations and address potential concerns. In response, FSD Kenya established the County Green Investment Facility to support 10 county governments to access finance for community-driven green development initiatives.

2) MSMEs and farmers—unlocking financial services for adaptation

Micro, small, and medium enterprises (MSMEs) and agriculture employ around 70% of workers in low-income countries. MSMEs are critical economic players in local adaptation but often lack tailored financial products. Through credit, insurance, and other financial services, MSMEs and farmers can invest in climate-smart technologies, such as drought-resistant crops, renewable energy solutions, raised homesteads, and solar water pumps. Credit also enables them to build business continuity strategies to withstand climate shocks and generate local employment opportunities, thus strengthening community resilience.

Despite this, many adaptation finance models do not fully engage the private sector or use it to complement their work. Only 2% of total global climate finance reaches MSMEs. Unlike local governments, inclusive financial service providers (IFSPs) that lend to MSMEs often lack access to large-scale public funding, particularly for climate-vulnerable MSMEs. However, they could mobilize private capital, mainly if supported by blended finance mechanisms, such as partial loan guarantees, credit lines, and climate insurance. In Malawi, MSMEs saw a 40% increase in the adoption of drought-resistant crops after they received targeted climate credit.

The UNCDF’s LoCAL program pioneered performance-based grants to support community-led initiatives. Yet, it initially overlooked private-sector financing mechanisms that could help MSMEs scale their adaptation efforts. However, new models are emerging to bridge this gap. The UNCDF and SNV’s GrEEn Project in Ghana has demonstrated how blended finance can de-risk private investment in climate-resilient MSMEs. The initiative offered first-loss guarantees and co-financing incentives to mobilize private bank loans for 1,200 MSMEs, with 40% securing follow-on investments.

The CGAP and MSC note that IFSPs provide an excellent channel to deliver financial services to climate-vulnerable MSMEs and farmers. However, few IFSPs currently offer products tailored to climate resilience and adaptation. MSC has developed an LLA toolkit focused explicitly on this segment to help IFSPs better understand and respond to the needs of MSMEs.

Case study: BRAC’s climate-smart microloans

These loans are designed to help smallholder farmers and women-led MSMEs in Bangladesh build resilience against climate shocks through accessible financial products. These include floating garden loans, which enable hydroponic farming on water hyacinth rafts in flood-prone areas, crop loans for saline-tolerant seeds, such as the “BINA dhan-11” rice, and livestock insurance-linked loans that provide drought-resistant animals paired with insurance coverage.

These loans have interest rates of 10–15%, which is significantly lower than informal lenders, and flexible repayment schedules aligned with agricultural harvest cycles. The loans typically range from USD 100 to USD 500 and have reached 500,000+ households since 2008. The program has boosted crop yields by 30% for farmers who adopted saline-tolerant varieties and increased incomes for those using floating gardens in flood-prone haor wetlands. BRAC mitigates risks of defaults due to climate disasters by incorporating post-disaster grace periods. It also offers emergency loans and bundles insurance with loans to ensure financial sustainability and empower vulnerable communities to adapt sustainably.

3) Vulnerable community members—accessing social protection mechanisms

The poorest and most climate-exposed populations—subsistence farmers, informal laborers, and disaster-affected communities—often lack access to credit or the ability to repay loans. Instead, they require grant-based support to build resilience to climate impacts and recover from them.

These populations benefit more from loss and damage compensation for climate-related disasters, social security grants to support basic needs and recovery, and community-based adaptation funds that provide small-scale assistance for localized challenges. For example, in Nepal, targeted social protection programs reduced post-disaster poverty spikes by 25% and ensured vulnerable households could recover more effectively.

Case study: KALIA

The Government of Odisha’s KALIA program (2018) supports climate adaptation indirectly through financial assistance. It provides INR 5,000–10,000 (USD 57-115) per year for agricultural inputs, INR 12,500 (USD 144) for livelihood diversification, risk mitigation tools worth INR 200,000 (USD 2,300) in the form of life and accident insurance, and INR 50,000 (USD 575) in interest-free loans to farmers. This support enables investments in drought-resistant seeds, non-farm livelihoods, such as poultry and fisheries, and adaptive technologies, such as drip irrigation.

These measures enhance resilience against climate shocks, such as cyclones, floods, and droughts. They supplement Odisha’s Climate Change Action Plan (2021–2030) and the central government’s National Innovation on Climate Resilient Agriculture (NICRA). For details, see the KALIA Guidelines and World Bank analysis.

A multi-tiered approach to local level adaptation: The role of private finance

The ongoing evolution from a comprehensive approach to a segmented LLA model improves efficiency, equity, and scalability in climate finance. This approach tailors interventions to the distinct needs and financial capacities of three key groups—local governments, MSMEs, and vulnerable communities—to unlock more targeted investment opportunities.

Unlike comprehensive approaches, which often struggle to attract large-scale financing, a differentiated model can ensure that private capital, public funds, and grants are directed to the actors best positioned to use them effectively.

This evolution of locally-led adaptation aligns with the Paris Agreement’s core principle of leaving no one behind while harnessing private sector investment to fill the adaptation finance gap.

Fueling change: The multiple impacts of increasing liquefied petroleum gas usage in rural India

Posted on by Deepesh Singh

Amid the serene locale of Balaghat — a small city in Madhya Pradesh, India — lives Sunita, a 45-year-old homemaker. Like many local residents, she used to cook food over a chulha, a traditional earthen stove fueled by firewood, coal, and dung cakes. The crackling flames were her constant companion, but they brought more than warmth to her kitchen. Acquiring fuel for the fire was an ongoing burden for the household, and a steady stream of smoke and searing heat accompanied the flames, which left Sunita coughing and her eyes stinging — a harsh reality that extended to her children, too.

Then, in 2018, a glimmer of hope emerged in the form of free access to a clean gas cookstove and a refillable cylinder of liquefied petroleum gas (LPG) under the Indian government’s Pradhan Mantri Ujjwala Yojana (PMUY) program. With LPG, Sunita initially found respite from the smoke-filled haze while reclaiming precious time for herself and her family. However, these improvements were short-lived, as the logistical challenges of LPG refills soon became apparent, adding both financial strain and inconvenience to her household.

Firstly, the program only provided the initial LPG cylinder free of charge, and the increasing cost of LPG refills added to the financial burden for her husband, who works as a smallholder farmer—especially during non-business seasons. Secondly, her village was located 25 km from the gas agency—outside of the catchment area where it made frequent deliveries—which led to delays of more than five days in receiving delivery of refilled cylinders. When this happened, Sunita had to rely on her husband to visit the agency for a refill, which took up almost half his day. As a result, their household was unable to obtain regular LPG refills and relied mostly on the biomass fuel they had used prior to the program.

The barriers to LPG adoption among rural households in India

As MSC has explored the barriers that hinder LPG cylinders’ adoption among individuals like Sunita, we’ve gained insights into the intricate challenges of rural households. MSC’s extensive research has unearthed three key factors that impede the regular refilling of LPG among rural communities:

  1. Accessibility challenges: The remoteness of rural areas poses logistical hurdles, which make direct home deliveries impractical for LPG distributors without incentives. As a result, customers must retrieve cylinders from agencies, incurring extra costs, spending valuable time, and facing considerable inconvenience.
  2. Financial challenges: The irregular income patterns prevalent in rural settings make it difficult for households to afford the recurring expense of LPG. This is particularly the case for those engaged in agriculture and wage labor. This financial instability often compels a shift toward cheaper biomass or solid fuels as substitutes.
  3. Cultural conditioning: Deep-rooted cultural and taste preferences for cooking over traditional chulhas contribute to the resistance to LPG adoption. Many households perceive biomass as abundant and cost-free, which undermines the perceived desirability of switching to LPG. Moreover, a prevalent lack of awareness of safety practices around LPG further reinforces the reluctance among rural customers.

MSC has tackled these challenges in LPG access through a program, facilitated by Bharat Petroleum Corporation Limited, that leverages the hundreds of thousands of self-help groups (SHGs) in operation across Madhya Pradesh, which reach 4 million rural households. A Self-Help Group is a village-based group of 10-20 individuals (women in this case) who contribute small regular savings to create a fund. Members borrow from this fund when needed, and SHGs with good financial discipline are linked to banks for credit, which they then on-lend to their members. Recognizing that this extensive SHG ecosystem could help significantly boost the uptake of LPG cooking, we worked with the Madhya Pradesh State Rural Livelihood Mission and the Ministry of Petroleum and Natural Gas to develop a need-based microloan product that has enabled SHG members to afford LPG cylinders regularly.

Scaling up a successful pilot program to boost LPG access

We initially offered this loan product through a limited pilot program that reached 100 SHG members. Then, after those loans were repaid successfully, we worked with our partners to scale up the program in Madhya Pradesh, giving the program and the loans a formal name: the Ujjwala Sakhi initiative and the Ujjwala loan product.

Ujjwala Sakhis are all women entrepreneurs and members of SHGs: We decided to exclusively work with women due to their central role in household chores, and in the culturally rooted barriers to LPG adoption, which often require a trusted, community-based approach to overcome. The SHG network provided a great platform to leverage this community model. As change agents, Ujjwala Sakhis play a pivotal role in addressing barriers related to accessibility and cultural norms around LPG usage. These women educate households about the benefits of LPG, facilitate the refilling process, and provide support to overcome traditional cooking preferences. In addition to these roles, Ujjwala Sakhis also help community members access the Ujjwala loan product. They assist SHG members in applying for the loan, ensuring that they understand the loan terms, and guiding them through the process of securing timely and affordable credit.

Throughout our efforts to scale this intervention, MSC developed three primary initiatives to address challenges related to LPG refilling:

  • Offering Ujjwala loans: These are small-ticket loans available to the SHG members. The loan amount covers the LPG refill cost, as paid to the distributor that provides the gas. The customer can repay the loan to the SHG over the course of three months.
  • Organizing awareness campaigns: Ujjwala Sakhis and LPG marketing companies organize awareness camps to overcome cultural barriers to regular gas refills, and to educate communities about safety practices they should follow when using LPG. These campaigns help to overcome community members’ fear of using LPG and related accessories, while highlighting the health risks of smoke from biomass stoves.
  • Appointing Ujjwala Sakhis to improve accessibility: Ujjwala Sakhis are SHG members, recruited as agents to facilitate last-mile delivery of LPG refills and LPG gas accessories. Ujjwala Sakhis keep up to seven LPG cylinders at their location (the maximum allowed, according to safe storage regulations), which makes them easily accessible to villagers. Customers can call or visit the Sakhi at any time to buy an LPG refill. As a result, they no longer have to spend time and money traveling to a distant agency to obtain a refill. Ujjwala Sakhis purchase these LPG cylinders at a discounted price from the distributor and sell them to customers at the market price. Usually, the difference between the market price and the discounted price constitutes the Ujjwala Sakhi’s incentive or commission for each LPG refill sale. In addition, they receive commissions for conducting campaigns to educate their community members on the benefits and usage of LPG refills, as well as for selling LPG accessories. Through this model, women entrepreneurs not only earn income but also gain recognition and respect within their communities, contributing to their economic and social empowerment.

MSC has been spearheading the Ujjwala Sakhi intervention across 28 districts in Madhya Pradesh in partnership with LPG marketing companies and the Madhya Pradesh State Rural Livelihood Mission. Approximately 1,000 women from SHGs in Madhya Pradesh have been enlisted as Ujjwala Sakhis. These individuals undergo training and orientation programs on an ongoing basis. After selection, they can start operations after signing a Memorandum of Understanding with the local gas agency in their respective areas.

Positive impacts across LPG promotion, women’s empowerment, health, livelihoods, and climate

Ujjwala Sakhis play a crucial role in promoting the use of cleaner fuel in India’s rural regions. As of September 2024, their efforts have facilitated more than 449,351 LPG refills in Madhya Pradesh within the program’s 35 months of operation. Thanks to the Ujjwala loans made accessible through the SHGs, LPG has become more affordable for rural customers, with more than 12,000 loans disbursed in the state by September 2024.

The Ujjwala Sakhi intervention primarily addresses the challenges of low or no uptake of LPG refills among rural communities. Yet it also has far-reaching impacts across multiple additional dimensions:

  • Women’s empowerment: It has strengthened women’s agency and alleviated drudgery for rural women.
  • Health promotion: It has prevented illnesses caused by harmful emissions from solid fuels.
  • Livelihood enhancement: It has created sustainable and market-linked income sources for women in SHGs.
  • Climate action: It has promoted the use of cleaner energy, which has reduced indoor air pollution and carbon emissions and mitigated deforestation.
  • Social value addition: It has enhanced the effectiveness of the Pradhan Mantri Ujjwala Yojana.

Impact in numbers:

Today, with the support of the Ujjwala program and Ujjwala Sakhis, Sunita now cooks with an LPG stove, her kitchen liberated from the threat of pollution from burning solid fuels, her family’s health protected, and her aspirations kindled with newfound opportunities. With the time they save from not needing to gather and cook with biomass, Sunita and women like her are able to focus on income-generating activities, education, or other personal goals, enabling them to enhance their economic independence and overall well-being.

To bring these benefits to more households, MSC is scaling the Ujjwala Sakhi initiative nationally, aiming to impact over 100,000 women in the next three years. Building on our efforts in Madhya Pradesh, we will lead the nationwide rollout with support from key stakeholders. The initiative offers substantial economic benefits and significant environmental impact, providing access to clean cooking fuel and livelihood opportunities, and promoting environmental stewardship. We also plan to explore carbon credit opportunities to sustain and incentivize these outcomes in the near future.

This blog was first published on the NextBillion platform on 9th April 2025.

Advancing climate adaptation planning

Posted on by Deepesh Singh

India’s particularly vulnerable tribal groups (PVTGs) face severe climate risks, which range from erratic rainfall to depleting ecosystems. They threaten their forest-based livelihoods and health. MSC engaged directly with people from the Juang, Korwa, and Sahariya communities across three Indian states to understand their challenges and identify actionable adaptation strategies. Our findings show that traditional coping mechanisms are no longer sufficient, and community-driven adaptation plans must be paired with support from local governments, CSOs, and financial institutions for long-term resilience.

Read the full report to explore insights and solutions.

Enabling an Open-Source AI Ecosystem as a Building Block for Public AI

Posted on by Saumya Dixit

As artificial intelligence rapidly reshapes our world, ensuring its development is fair, transparent, and inclusive is more important than ever.

This policy brief advocates for investments in open-source AI as a public good. It presents a roadmap for the G7 to build a competitive and responsible AI ecosystem through four key policy recommendations: expansion of open access to data, support for sustainable governance, policy alignment across nations, and local capacity building.

Read on to know how the G7 can shape a more open, fair, and future-ready AI ecosystem.