Publication:
Rethinking Electricity Tariffs and Subsidies in Pakistan

Loading...
Thumbnail Image
Files in English
English PDF (711.67 KB)
3,348 downloads
English Text (113.3 KB)
205 downloads
Published
2011-07
ISSN
Date
2014-08-19
Editor(s)
Abstract
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.
Link to Data Set
Citation
Trimble, Chris; Yoshida, Nobuo; Saqib, Mohammad. 2011. Rethinking Electricity Tariffs and Subsidies in Pakistan. © http://hdl.handle.net/10986/19456 License: CC BY 3.0 IGO.
Associated URLs
Associated content
Report Series
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections

Related items

Showing items related by metadata.

  • Publication
    Policy Notes : Indian Power Sector
    (Washington, DC, 2012-06-26) World Bank
    This note lays out the implications for the financial sector and budget of the huge and increasing losses of Indian distribution companies (DisComs) and presents potential approaches to address the issue. It is divided into two parts: part one is approach to financial sustainability of distribution business; and part two is international experience on coal imports and mitigation of market risk. The most urgent need is to address the problem of financial distress of the utilities, while using the crisis as leverage to implement regulatory and governance reforms that will be essential to the longer-term sustainability of any short-term actions agreed by the utilities.
  • Publication
    Honduras
    (World Bank, Washington, DC, 2010-05) Energy Sector Management Assistance Program
    This report was prepared in response to a request by the government of Honduras for assistance in the preparation of a power sector strategy for the country. Specifically, the government asked for help in identifying the main issues in the power sector, and in addressing them through formulation of a clearly defined, achievable strategy. Left unresolved, these issues risk derailing the country's macroeconomic framework, potentially damaging the competitiveness of the country and its prospects for poverty reduction. The main issues to be analyzed in the study were identified at a workshop held on September 19, 2006, in Tegucigalpa, jointly with the Secretaria de Recursos Naturales y Ambiente (SERNA) and the Comision Presidencial de Modernizacion del Estado (CPME), and with the participation of representatives from the Empresa Nacional de Energia Electrica (ENEE), civil society, the private sector, Congress, public sector agencies, donors, utilities, and ministries. It was decided that the study would be divided into two components: (a) the first would identify and evaluate options on institutional reforms, particularly ENEE's restructuring and management, and securing electricity supply; and (b) the second would formulate a power sector strategy. Two reports will be prepared, with the second report to be finalized according to the timing of the government's decision. This first report analyzes the institutional and policy issues; financial and fiscal concerns; social aspects, such as tariffs and subsidies, and access to electricity; and investment requirements including the development of renewable resources. The report is divided into two parts. Part A presents a diagnostic of the electricity sector, including ENEE's financial performance, fiscal impacts, and reliability of supply, institutional and legal framework, pricing policy, and electricity coverage. Part B evaluates the options available to improve sector efficiency, ensure financial sustainability, promote the diversification of energy sources, and increase electrification coverage.
  • Publication
    The Design and Sustainability of Renewable Energy Incentives : An Economic Analysis
    (Washington, DC: World Bank, 2015) Meier, Peter; Vagliasindi, Maria; Imran, Mudassar; Eberhard, Anton; Siyambalapitiya, Tilak
    Rapid urbanization and economic growth, new demographic trends, and climate change are key challenges that developing countries must face as they strive to meet growing energy demand. The main objectives of this study are to offer: (a) a global taxonomy of the economic and financial incentives provided by renewable support schemes and (b) an economic modeling of the sustainability and affordability of such support schemes. In an attempt to contribute to the lively debate, this study provides a global taxonomy of the economic and financial incentives provided by renewable energy (RE) support schemes. It summarizes economic models of the sustainability and affordability of such support schemes, alongside operational advice on how the regulatory design may need to be modified to minimize the impact on the budget and be affordable to the poor, as well as how to identify and fill the financing gap. This analytical framework: (a) differentiates and illustrates tradeoffs among local, regional, and national impacts, in the short and long run; (b) captures distributional impacts (since subsidies to cover the incremental costs of RE may have very different beneficiaries); and (c) captures externalities and compares (where possible) alternative projects based on equivalent output and cost (comparing, for example, RE and energy efficiency projects against those using fossil fuels). The report is organized as follows: chapter one gives introduction. Chapter two presents the analytical framework that underpins the case studies, and provides the background for the principal research hypothesis of this report, which is better attention to the principles of economic analysis and market efficiency leads to more sustainable and effective policies. Chapter s three to ten present country case studies for Vietnam, Indonesia, Sri Lanka, South Africa, Tanzania, Egypt, Brazil, and Turkey. The conclusions of the study are presented in chapter eleven.
  • Publication
    Uzbekistan : Energy/Power Sector Issues Note
    (World Bank, Washington, DC, 2013-06) Kochnakyan, Artur; Khosla, Sunil Kumar; Buranov, Iskander; Hofer, Kathrin; Hankinson, Denzel; Finn, Joshua
    This note focuses on the energy and power sector in Uzbekistan with the purpose of identifying some of the key issues faced by the sector and outlining potential solutions. In particular, the note aims to inform the Government thinking by providing input on priorities in the sector. The note also outlines potential solutions the Government may want to consider to address the identified challenges in the short and longer time and highlights the areas where the Government can start acting immediately. The analysis is based on the information and data provided by the Government during preparation of the Bank's investment lending operations, other analytical work as well as data/information collected from public sources. The note is structured as follows: section one discusses the importance of the energy sector to the economy and provides an overview of the sector. Section two provides a more detailed overview of the power sector. Section three identifies the principal challenges in the power sector. Section four proposes potential solutions to address these challenges. Finally, section five outlines a potential role for the World Bank in supporting the Government to address power sector challenges.
  • Publication
    Nicaragua : Energy Sector Policy Note, Executive Summary
    (Washington, DC, 2012) World Bank
    The increase in oil prices has created a growing economic pressure in Nicaragua. The electric power industry, especially, has generated controversy, because electricity prices have not kept pace with the costs of production. The situation at the beginning of 2006 was clearly unsustainable, and the entry of a new government provided an opportunity to refresh the vision of the sector, and address the problems. The objective of this note is to provide a balanced approach, taking into account both the short-term and long-term prospects of the sector, together with the lessons learned in similar situations. The questions facing the sector relate to its financial situation, the legal framework, the patterns of use of energy in Nicaragua, access and coverage of electric power, and its fiscal impact. Possibly the most important recommendation is to attenuate the disagreements with the government and seek areas of cooperation to improve the conditions of service. This should involve a quantification of the financial losses, and an operational audit to determine the status of implementation of their obligations to agents, investors, and customers.

Users also downloaded

Showing related downloaded files

  • Publication
    World Development Report 2006
    (Washington, DC, 2005) World Bank
    This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.
  • Publication
    The Journey Ahead
    (Washington, DC: World Bank, 2024-10-31) Bossavie, Laurent; Garrote Sánchez, Daniel; Makovec, Mattia
    The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.
  • Publication
    Classroom Assessment to Support Foundational Literacy
    (Washington, DC: World Bank, 2025-03-21) Luna-Bazaldua, Diego; Levin, Victoria; Liberman, Julia; Gala, Priyal Mukesh
    This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.
  • Publication
    Lebanon Economic Monitor, Fall 2022
    (Washington, DC, 2022-11) World Bank
    The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.
  • Publication
    Argentina Country Climate and Development Report
    (World Bank, Washington, DC, 2022-11) World Bank Group
    The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.