The Transition from Underpricing Residential Electricity in Bangladesh : Fiscal and Distributional Impacts

The electricity sector in Bangladesh has been facing unprecedented challenges, with severe capacity constraints and sector subsidies that quadrupled from 0.2 percent to 0.8 percent of gross domestic product (GDP) between 2010 and 2012, driving the government's fiscal deficit deeper. This policy note examines the poverty and distribution impact of one such reform-residential electricity tariff increases-along with their fiscal implications. A challenge of such adjustments is how to minimize their impact on the poor and vulnerable. Using household survey data, this report studies the distributional and fiscal implications of the residential tariff adjustments between March 2010 and March 2012 on to inform policy dialogue on the provision and targeting of electricity subsidies. Electricity subsidies are defined as the difference between the cost of supplying a unit of electricity and the tariff the end-user is charged for a given unit. Between 2010 and 2012, real cost of supply increased almost 20 percent. This policy note focuses on just one part of a much broader and complex system of connected energy policies. The policy implications of this analysis should only be considered in light of this broader context. In particular, this note does not study in detail the complex issues of generation and operational efficiency (in transmission and distribution). Second, this note does not study the political economy of tariff and subsidy reform. Tariff increases have been a source of social unrest, and planned increases could generate additional unrest. It will be important for the government to consider the political economy of further reform carefully. Moving forward, both of the new slab systems being discussed could relieve the fiscal burden of subsidies.

Bibliographic Details

Main Authors:	Ahmed, Faizuddin, Trimble, Chris, Yoshida, Nobuo
Language:	English en_US
Published:	World Bank, Washington, DC 2013-01
Subjects:	ACCESS TO ELECTRICITY, AGRICULTURE, APPROACH, BALANCE, COAL, CONNECTED HOUSEHOLDS, CONSUMER PRICE INDEX, CONSUMERS, CONSUMPTION INCREASES, CONSUMPTION LEVELS, COST OF ELECTRICITY, COSTS OF ELECTRICITY, CROSS SUBSIDIES, CROSS-SUBSIDIZATION, CRUDE OIL, CRUDE OIL PRICE, DECISION MAKING, DEMAND FOR ELECTRICITY, DIESEL, DISTRIBUTION COMPANIES, DISTRIBUTION OF ELECTRICITY, EFFECTIVE SUBSIDIES, ELECTRIC POWER, ELECTRIC POWER CONSUMPTION, ELECTRIC SUPPLY, ELECTRICITY, ELECTRICITY ACCESS, ELECTRICITY BILL, ELECTRICITY BILLS, ELECTRICITY CONNECTIONS, ELECTRICITY CONSUMPTION, ELECTRICITY COSTS, ELECTRICITY DEMAND, ELECTRICITY GENERATION, ELECTRICITY POLICY, ELECTRICITY PRICING, ELECTRICITY SECTOR, ELECTRICITY SERVICE, ELECTRICITY SUBSIDIES, ELECTRICITY SUPPLY, ELECTRICITY TARIFF, ELECTRICITY TARIFFS, ELECTRICITY UTILITY, ENERGY CONSUMPTION, ENERGY MARKETS, ENERGY POLICIES, ENERGY PRICES, ENERGY STATISTICS, EXPORTS, FORECASTS, FUEL, FUEL SOURCES, GAS, GAS PRICES, GDP, GENERATION, GENERATION CAPACITY, GENERATION COSTS, GROSS DOMESTIC PRODUCT, HOUSEHOLD ANALYSIS, HOUSEHOLD CONSUMPTION, INEFFICIENCY, INFLATION, INTERNATIONAL ENERGY AGENCY, KILOWATT HOUR, LIFELINE TARIFFS, LNG, LOW LEVELS OF ACCESS, LOW LEVELS OF CONSUMPTION, LOW TARIFFS, MINERAL RESOURCES, MONTHLY CONSUMPTION, NATURAL GAS, NATURAL GAS PRICE, NEW POWER PLANTS, OIL, PARTIAL EQUILIBRIUM ANALYSIS, PEAK DEMAND, PETROLEUM, PETROLEUM PRODUCTS, PETROLEUM SECTOR, POLITICAL ECONOMY, POLITICAL ECONOMY OF REFORM, POLITICAL ECONOMY OF TARIFF, POWER, POWER CONSUMPTION, POWER DISTRIBUTION, POWER GENERATION, POWER GRID, POWER PLANTS, POWER PRODUCER, POWER SECTOR, POWER SECTOR REFORMS, POWER SHORTAGES, PRIMARY FUEL, PRIVATE SECTOR, QUANTITY OF ELECTRICITY, REPUBLIC, RURAL CONSUMERS, RURAL ELECTRICITY, RURAL ELECTRIFICATION, RURAL ELECTRIFICATION PROGRAM, RURAL HOUSEHOLDS, SOURCE OF ENERGY, SUBSIDIZATION, SUPPLY COSTS, TARIFF LEVELS, TARIFF STRUCTURE, TARIFF STRUCTURES, UTILITIES, UTILITY COMPANY,
Online Access:	http://documents.worldbank.org/curated/en/2013/01/17647682/transition-underpricing-residential-electricity-bangladesh-fiscal-distributional-impacts https://hdl.handle.net/10986/18362
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