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In the Dark: How Much Do Power Sector Distortions Cost South Asia?

Author:
Zhang, Fan

ISBN:
978 1 4648 1154 8
Format:
Paperback
Pages:
224
List price(s):
39.95 USD
32.95 GBP
37.00 EUR

Publication date:
1 December 2017

Short description: 

Offers a comprehensive assessment of the economic cost of energy sector distortions in Bangladesh, India, and Pakistan. This report uses microeconomic data from utilities, households, and firms to estimate key parameters for each country. It then uses these parameters to generate precise estimates of the cost of regulatory, institutional, and social and environmental distortions.

Full description: 

Electricity shortages are among the biggest barriers to South Asia's development. Did you know that 30 percent of households in South Asia are not connected to the power grid? Even households and firms that are connected often experience long hours of blackouts. How much do power sector distortions cost South Asian economies? Previous research considers a narrow definition of the power sector which includes generation, transmission, and distribution, but often does not account for the upstream distortions in coal and gas production, downstream distortions from the lack of electricity access, or the pollution generated by fossil-fuel plants. They also address only the fiscal costs of distortions though many distortions do not have a direct fiscal cost. This study offers a comprehensive assessment of the economic cost of energy sector distortions in Bangladesh, India, and Pakistan. It uses microeconomic data from utilities, households, and firms to estimate key parameters for each country. It then uses these parameters to generate precise estimates of the cost of regulatory, institutional, and social and environmental distortions. The study finds that some of the most costly distortions are upstream and downstream. Urgent power sector reforms should be a top priority because they can rapidly and effectively promote economic growth. Smart reforms would reduce the need for massive investments in generation because existing capacity is currently poorly utilized. The report finds that price distortions are often not the most important source of economic cost. Institutional reforms would have a greater and more sustainable effect than energy pricing liberalization alone. Removing price distortions and addressing environmental costs could, however, lead to a sharp increase in electricity prices. Therefore, improving efficiency and providing targeted social assistance to poor and vulnerable households should be prioritized. In the absence of privatization, incentive regulation is likely to be more effective than corporatization to improve efficiency.

Biography: 

The World Bank came into formal existence in 1945 following the international ratification of the Bretton Woods agreements. It is a vital source of financial and technical assistance to developing countries around the world. The organization's activities are focused on education, health, agriculture and rural development, environmental protection, establishing and enforcing regulations, infrastructure development, governance and legal institutions development. The World Bank is made up of two unique development institutions owned by its 185 Member Countries. The International Bank for Reconstruction and Development (IBRD) focuses on middle income and creditworthy poor countries and the International Development Association (IDA), which focuses on the poorest countries in the world.

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