RESEARCH NOTES : AN INVESTIGATION OF ELECTRICITY TARIFF REFORM ON HOUSEHOLDS WELFARE

• Published in: Pakistan journal of applied economics 2023-01, Vol.33 (1)
• Main Author: Sohail, Fouzia
• Format: Article
• Language: English
• Subjects: Affordability; Consumers; Crowding; Development economics; Electricity; Elimination; Households; Polls & surveys; Poverty; Prices; Reforms; Resource allocation; Subsidies; Tariffs; Transformation; Welfare
• ISSN: 0254-9204; 2519-0431

Over the past few years, the Government of Pakistan has implemented significant reforms in the energy sector that directly impact the well-being of households in the country. These reforms include changes in electricity tariffs, resulting in a reduction of electricity subsidies and a gradual increase in prices for end-consumers. However, adjusting the policy to raise subsidized electricity tariffs is complex. Such an increase in tariffs reduces affordability for consumers and affects the overall welfare of households. Despite the importance of this issue, there is limited research on the welfare implications of the recent rise in electricity tariffs caused by the gradual elimination of subsidies. A study titled 'Household Energy Poverty in Pakistan' was conducted to address this research gap. This study was supported by the 'Research for Social Transformation and Advancement' (RASTA), an initiative of the Pakistan Institute of Development Economics (PIDE), through the Competitive Grants Programme Award. Its main objective was to examine the crowding-out effect of increased electricity tariffs on the allocation of household resources at different income levels. The following research note is derived from the same study, which indicates that an increase in electricity tariffs negatively affects individuals by reducing the amount of income available for spending on other goods and services. This research aimed to compare the affordability of electricity for households during two periods characterized by low and high tariff rates. To achieve the objective, data from the Household Integrated Economic Survey (HIES) of 2013-14 and 2018-19 were utilized because electricity tariffs were relatively lower in 201314 compared to 2018-19. The HIES 2018-19 survey was the most recent available at the time of the study.