Evaluation of the financial impact of electricity subsidy on the returns of tubewell owners and water buyers under declining water tables in Balochistan, Pakistan

This study examines the financial impacts of electricity subsidy on tubewell ownersand water buyers, and proposes alternative subsidy policy options that could balance theefficiency and equity. The results suggest that the subsidy plays a key role in stabilisingproduction by providing financial incentives to tubewell owners to stabilise extraction cost underthe declining watertables. The removal of subsidy will have considerable financial implicationson tubewell owners, as well as water buyers. Considering the equity concerns and possiblesocial and political turmoil, in the short run the study proposes that subsidy on electricity may bereduced to 50% to avoid social unrest and political repercussions. However, in the long run, toachieve efficiency and sustainability, the study suggests: (i) adoption of more appropriatecropping patterns suitable with local climatic conditions; (ii) adoption of most suitable andhighly efficient irrigation techniques and technology; (iii) improved long-term ground watersecurity through groundwater recharge via construction of dams; and (iv) strengthening of watermarkets system and institutional infrastructure.