Gender Differentiated Impacts of Kerosene Subsidy Reform in Bangladesh
This paper is one of a series developed to examine the gender-differentiated impacts of fossil-fuel subsidies and their reform in Bangladesh, India and Nigeria. It begins with the hypothesis that because women are largely under-represented in decision-making processes relating to energy, and that women typically experience high levels of intra-household inequality and most exposure to indoor air pollution, that subsidies for household cooking fuels, and changes to these subsidies, will have the biggest impacts on women. The research focuses on low-income households in low- and middle-income countries, where the impact of subsidies and their reform on development in general, and on women’s development in particular, is likely to be greatest.
In Bangladesh more than 80% of surveyed households did not know about the government registered (subsidised) price of kerosene (BDT 65 per litre) and 95% of households were not aware of the subsidy. The survey found that 99% of households bought from local stores, on average, around 1.5 km away with an average purchase time of around 46 minutes. Men had the responsibility to go and buy kerosene for more than 94% of households and reported purchasing kerosene on average about once a week. Almost a quarter of households (21%) purchasing from local stores had faced unavailability of kerosene in the last six months.
The subsidised price is often not available in the market place, with households paying above and sometimes very high above the official subsidised price. This implies reduced benefits to households from subsidising fuel prices as a policy to support affordability and accessibility of a fuel by women, as well as highlighting potential inefficiencies and diversion. For example in Bangladesh the market registered price is currently BDT 65, a reduction from BDT 68 following changes in the pricing policy in April 2016. Yet from the field survey that the price paid by the households per litre of kerosene deviates from the market registered price by, on average, a 13.7% increase, with a mean price of between BDT 76-78 per litre. The survey found that there had not been a pass-through in the reduction of kerosene prices to consumers, with most households (87%) reporting that they did not know about the kerosene price reduction.
In Bangladesh households were asked about various coping mechanisms given two scenarios for a potential increase in the price of kerosene by 20% and by 50%, that might follow subsidy reforms. Households surveyed would be willing to cope with an increased price via three main strategies: reducing the consumption of kerosene, reducing consumption of other goods and increasing household income. The households might opt for any strategy or go with a combination of coping mechanisms. With a lower (20%) price increase some households would absorb increased price by additional income generating activities (IGA) (27.14%), followed by a reduction in kerosene use alone (22.06%). Given a higher (50%) price increase families would tend to both reduce expenditure on kerosene combined with additional engagement in IGA (25.76%), further reductions in expenditure on other goods and IGA (25.6%), and reduction of expenditure on other goods (24.8%). In both price increase scenarios the majority of all households would decrease expenditure on kerosene; where households identified coping with a kerosene price increase alongside a reduction in expenditure in other goods.This was mainly found to be for food (followed by reduced spending on recreation and clothes) and increased IGA was identified as a coping mechanism. This involved more work by the, usually male, household head.
Whilst most households reported an ability to absorb price increases associated with reforms, this comes with accompanying coping strategies including increasing incomes, reduced use of the fuel, and cutting back on other expenditures (e.g. food in Bangladesh). This suggests that there are opportunities to reform fuel subsidies, but that reforms resulting in price increases need to be undertaken with great care, both because of the income effect, but also due to a potential energy use effect on women from poor households. Depending on the scale of price increases, the income effect is likely to be particularly pronounced for kerosene used by the poor for lighting and for those households, as surveyed in Bangladesh, without access to electricity and therefore with limited opportunities to switch.
Team Composition: Dr. K.A.S Murshid (Team Leader) and Tahreen Tahrima Chowdhury
Sponsoring Agency: International Institute of Sustainable Development (IISD) and Energia