LPG in Mexico is primarily distributed in two ways: through large 20-kg and 30-kg cylinders and via large, stationary tanks.

In 2008, approximately 80% of households in Mexico used LPG as their primary cooking fuel, with a notable difference between rural (54%) and urban (87%) households.

On average, households consumed 29 kg of LPG per month, representing 5.6% of rural household expenditure and 4.4% of urban household expenditure.

Mexico historically subsidized LPG by setting a maximum price each month, which was often below the actual costs of importing LPG from the international market.

These subsidies placed a financial burden on the state-owned energy company, Pemex, as they absorbed the difference between the subsidized price and the actual import costs without compensation.

Since 2010, the Mexican government has implemented annual average increases in retail prices of LPG.

These price increases have typically ranged from 7% to 8% annually.

The aim of these increases was to gradually reduce the government's subsidy expenditure on LPG.

While these price hikes did not completely eliminate subsidies during periods of high international crude prices, they significantly reduced the average subsidy expenditure.

Notably, during periods of low international crude prices, the gradual price increases effectively eliminated LPG subsidies, saving government resources.

Mexico has developed a comprehensive social safety net system over the past 18 years, making LPG subsidies less crucial as a social welfare mechanism.

A significant component of this system is the conditional cash transfer program called Oportunidades, which covers 5.5 million households through distribution centers and debit cards.

Oportunidades also includes a subcomponent called Oportunidades Energeticas, providing a monthly supplement of MXN 60 (USD 4.60) to help vulnerable households afford energy-related expenses.

Oportunidades primarily targets low-income households and offers cash transfers linked to accessing health and education services.

Payments are made to female heads of households, ensuring that funds are directed toward essential needs.

The program boasts an efficient monitoring system that allows for swift follow-up on non-compliance, with benefits reduced for periods of non-compliance and adjustments made in subsequent payments.

In 2010, more than 5 million people were enrolled in Oportunidades, demonstrating its widespread reach and impact in Mexico's social welfare landscape.

Gradual price increases in Mexico have demonstrated the feasibility of this approach, even in the face of potential political resistance to regular price changes.

Mexico's experience suggests that in some countries, it may not be necessary to provide LPG subsidies to assist the poor, especially if there is existing social assistance capacity to support low-income households.

Mexico's government opted for a reform plan that involved the removal of LPG subsidies, possibly due to the country's well-established social assistance programs.

The extensive social assistance capacity in Mexico, including programs like Oportunidades, may have influenced the decision to eliminate LPG subsidies, as these programs effectively address the needs of low-income households.

Additionally, the fact that LPG is already the primary cooking fuel for households across all income quintiles in Mexico may have reduced concerns about the need to encourage a shift toward modern cooking fuels, further justifying the removal of LPG subsidies.

In 2004, Peru initiated fossil fuel consumption subsidies, including LPG, in response to rising international oil prices.

To manage the impact of international price hikes on domestic markets, the government established the Fuel Price Stabilization Fund (FPSF).

The FPSF was implemented as a commodity subsidy scheme, featuring upper and lower price bands for domestic energy prices.

The universality of the FPSF resulted in growing fuel subsidies, reaching a peak of 1.4% of GDP in 2008.

In 2011, LPG subsidies amounted to 0.15% of GDP, with the FPSF disbursing USD 261 million to support LPG consumption.

The subsidy scheme was later found to be highly regressive and primarily benefiting the wealthiest 20% of the population.

Consequently, efforts were made to increase fuel prices, with LPG for household consumption and diesel being the only fuels to remain under the subsidy scheme since 2012.

In 2007, a census in Peru revealed that 37% of the population lacked access to modern fuels for cooking, with 60% residing in rural areas.

In response, the Fondo de Inclusión Social Energético (FISE) was established in 2012 to enhance access to modern cooking fuels, particularly LPG, across Peru.

FISE operates as a cross-subsidy scheme, funding itself through a surcharge on other energy consumption, including electricity and hydrocarbons.

Eligibility for FISE subsidies is determined based on various criteria, including average monthly electricity consumption, household income, registration in the National Registry of Identification and Civil Status, precarious house construction, and allowing one beneficiary per family.

Under the FISE scheme, eligible households receive a monthly voucher valued at 16 soles (approximately USD 5.70), which provides financial support for their first LPG refill each month.

For families meeting FISE criteria but lacking an LPG cook stove, the program offers a two-burner stove, hose, and a 10-kg LPG canister.

Vouchers are delivered through a numeric code on the electricity bill, which can be redeemed via mobile phone.

Subsidy recipients can redeem their subsidy allowance for up to two months, and the LPG must be purchased through an "authorized LPG agent," which constitutes an expanded distribution network established since the program's inception.

To stabilize LPG consumer prices and manage subsidy costs, a pricing mechanism featuring a low price band can be effective.

Such a mechanism allows for gradual increases in consumer prices, helping to reduce subsidy expenditure, especially during periods of stable or declining international LPG prices.

However, if the price band is set too low, it may not effectively control subsidies during prolonged periods of increasing international energy prices.

Well-designed voucher systems can play a crucial role in targeting and reducing total LPG subsidy expenditure by cross-subsidizing other fossil fuels.

Targeting can be based on various household indicators, such as electricity consumption, type of house construction, school enrollment, or income.

These voucher systems are a means to provide financial assistance where it's needed most while managing subsidy costs effectively.