| Summary: | This report examines the system of residential electricity subsidies in Pakistan, and explores how it can be improved to better assist households within the existing political and budgetary constraints. The report is multi-disciplinary in nature, drawing on specially commissioned analysis of survey and administrative data on household electricity consumption, as well as a qualitative assessment of household and service provider attitudes and experiences. Based on the findings of this research, the report suggests various ways in which the Government of Pakistan can better target subsidies and manage the reform in a politically sensitive manner. The report is structured as follows: chapter I describes the current system of electricity subsidies in Pakistan and the pricing mechanism, takes stock of international experience on energy subsidy reforms, and highlights the importance of considering subsidies as part of the broader social safety net. Chapter II examines the relationship between electricity consumption and welfare using household survey and electricity company microdata. Chapter III presents the findings of the qualitative study, illustrating how households use electricity, manage their bills, and cope with increasing electricity costs and service disruptions. Finally, chapter IV summarizes the policy implications arising from the multi-disciplinary study, and presents recommendations on how to improve the affordability of electricity for households in need in a manner that is politically acceptable and sustainable
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