Rethinking Electricity Tariffs and Subsidies in Pakistan

Pakistan's electricity sector is in crisis: extended periods of blackouts persisted in 2010 and circular debt is increasing. Despite investments in generation capacity, electricity demand continues to exceed supply, with blackouts as long as 8-10 hours per day in cities and sometimes double that in rural areas, and is widely recognized as a severe obstacle to growth and poverty reduction. In November 2010, the government was forced to rent the world's largest power ship to boost generation capacity. Meanwhile, the government of Pakistan's (GOP) inability to finance its commitment to fund subsidies, inefficiencies of the sector entities including low collections, delays in determination and notifications, and increased cost of fuel imports contribute to an increasingly severe circular debt problem. The analysis shows that given the current cost of electricity supply, the March 2011 tariff structure will improve the benefit incidence of electricity subsidies for residential users and reduce fiscal burden significantly in comparison to March 2008. For example, our estimations suggest the share of electricity subsidies for the richest 20 percent of the population declined from nearly 40 percent in March 2008 to 29 percent in March 2011. Despite this improvement, the richest households remain the greatest beneficiaries of the subsidies. Also, while the fiscal burden of electricity subsidies increased in nominal terms during the same time period, it declined by almost 60 percent in real terms. The results of the benefits incidence and scenario analyses have a number of policy implications for the fiscal burden of subsidies, and their ability to protect the poor and vulnerable efficiently.

Bibliographic Details

Main Authors:	Trimble, Chris, Yoshida, Nobuo, Saqib, Mohammad
Language:	English en_US
Published:	World Bank, Washington, DC 2011-07
Subjects:	ALLOCATION OF RESOURCES, ALTERNATIVE ENERGY, ALTERNATIVE ENERGY DEVELOPMENT, APPROACH, AVAILABILITY, AVERAGE TARIFF, BALANCE, BALANCE OF PAYMENTS, BARRELS PER DAY, BLOCK TARIFF, CAPACITY FOR ELECTRICITY, CASH TRANSFERS, COAL, COMMERCIAL CUSTOMERS, CONSERVATION, CONSUMER PRICE INDEX, COST OF ELECTRICITY, COST OF SERVICE, COST RECOVERY, CRUDE OIL, CRUDE OIL PRODUCTION, CUSTOMER SERVICE, DISCOS, DISTRIBUTION COMPANIES, DISTRIBUTION COMPANY, DISTRIBUTION LOSSES, DISTRIBUTION MARGIN, DISTRIBUTION OF ELECTRICITY, DOMESTIC GAS, DOMESTIC NATURAL GAS, EFFICIENCY IMPROVEMENT, EFFICIENT ALLOCATION, ELECTRIC POWER COMPANY, ELECTRIC SUPPLY, ELECTRICAL POWER, ELECTRICITY, ELECTRICITY BILLS, ELECTRICITY CONSUMERS, ELECTRICITY CONSUMPTION, ELECTRICITY DEMAND, ELECTRICITY GENERATION, ELECTRICITY MARKET, ELECTRICITY PRODUCTION, ELECTRICITY REFORMS, ELECTRICITY SECTOR, ELECTRICITY SUPPLY, ELECTRICITY TARIFFS, ELECTRICITY USE, EMPLOYMENT, ENERGY CONSUMPTION, ENERGY MIX, ENERGY SECURITY, ENERGY USE, FISCAL DEFICIT, FOSSIL FUELS, FUEL COST, FUEL PRICE, FUEL PRICES, GAS, GAS FURNACE, GAS PRICES, GENERATING CAPACITY, GENERATION CAPACITY, GOVERNMENT OWNERSHIP, GOVERNMENT POLICY, GROSS DOMESTIC PRODUCT, HOUSEHOLD CUSTOMERS, HOUSEHOLD ELECTRICITY CONSUMPTION, HYDROPOWER, INCOME, INDEPENDENT POWER PRODUCERS, KILOWATT HOUR, LEVELS OF CONSUMPTION, LIVING STANDARDS, LOWER COST OF PRODUCTION, NATURAL GAS, NOMINAL PRICES, NUCLEAR POWER, NUCLEAR POWER PLANT, OIL, OIL CRISIS, OIL EQUIVALENT, OIL PRICE, OIL PRICES, OIL PRODUCTS, OIL SUPPLIES, POOR HOUSEHOLDS, POWER COMPANIES, POWER COMPANY, POWER CRISIS, POWER GENERATION, POWER PRODUCERS, POWER PURCHASE PRICE, POWER SECTOR POLICIES, PRICE ADJUSTMENTS, PRICE ELASTICITY OF DEMAND, PRICE INCREASES, PRICE OF ELECTRICITY, PRICE SIGNALS, PRICE VOLATILITY, PUBLIC SECTOR, PUBLIC UTILITIES, QUANTITY OF ELECTRICITY, REFINERIES, RESIDENTIAL CONSUMERS, RESIDENTIAL CUSTOMERS, RESIDENTIAL USERS, REVENUE COLLECTION, SOURCE OF ENERGY, SUPPLY OF ELECTRICITY, TARIFF ADJUSTMENTS, TARIFF CHANGES, TARIFF RATES, TARIFF REFORM, TARIFF REFORMS, TARIFF SETTING, TARIFF STRUCTURE, THERMAL PLANTS, THERMAL POWER, THERMAL POWER GENERATION, TRANSMISSION SYSTEM, UTILITIES, POVERTY AND DISTRIBUTION ANALYSIS, PSIA, DISTRIBUTIONAL ANALYSIS,
Online Access:	http://documents.worldbank.org/curated/en/2011/07/14928557/rethinking-electricity-tariffs-subsidies-pakistan https://hdl.handle.net/10986/19456
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