Font Size:
The impact of subsidized electricity tariff changes on the welfare of households receiving subsidies
Last modified: 2017-12-21
Abstract
Since mid-2003, the subsidized electricity tariff enjoyed by households with an installed capacity of 450 VA and 900 VA has not changed. This condition causes the burden of subsidies in the state budget increasingly heavy. This study examines the impact of subsidized electricity tariff increase on subsidized household welfare and redistribution of subsidy allocation. As a case study, this research use Indonesia-National Socio-Economic Survey to estimate household electricity demand for different household groups (i.e., low, middle, and high expenditure). The analysis divided into two stages: first estimating household electricity demand for each household group when prices are fixed; the second measure changes in welfare, inefficiency, and redistribution of subsidy allocations. The empirical studies show that the increase in tariffs causes the welfare of subsidized households to decline. The study also showed inefficiency in the allocation of subsidies to the top 20% group with an installed capacity of 450 VA. In addition, subsidized households in the lowest 40% group which initially only enjoyed 26.26% increased to 34.16% after the tariff increase. On the other hand, the top 20% group, which initially enjoyed the electricity subsidy allocation of 28.74%, decreased to 20.40% after the tariff increase
An account with this site is required in order to view papers. Click here to create an account.