Fouzia SOHAIL*

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 2013-
14 compared to 2018-19. The HIES 2018-19 survey was the most recent available
at the time of the study.

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