Where fuel prices are controlled and subsidised by the government, price increases have often met with broad public opposition and, in some cases, violent demonstration. Where governments have been successful they have needed to ensure that reform was politically feasible and the impact on influential groups was mitigated. There are a number of countries which have instituted reforms with some degree of success. These countries have usually undertaken various activities, often different activities simultaneously. This report is focused on examples from both low- and middle-income developing countries.
Factors that seem to have contributed to success include: strong research/social and political analysis; cash or in-kind transfers to cushion the impact on the poor; policy coherence; a phased approach; attention to public trust; public campaigns; and persistence and adaptability that keeps in mind the key objectives. For example:
- Independent research, conducted early on, can quantify the level of subsidy, assess distribution of its costs and benefits and estimate the likely effects of its removal; and can inform cash transfer targeting.
- To protect lower-income households, several governments initiated cash transfer or benefit-in-kind processes. Such schemes must involve a low-cost administrative mechanism.
- Public education campaigns have been used to promote understanding of the rationale for subsidy removal.