32 quality are the best option. Increasing the benefits of social insurance programs not linked to earnings―such as social pensions, survivorship pensions, disability pensions, and unemployment benefits―can be helpful if they cover the poor. Near-cash instruments such as food stamps or vouchers for transport have slightly higher administrative costs than cash but can be politically popular. Fee waivers or vouchers for health and education help households maintain access to services even if households become poorer (World Bank 2008).

# **_Service quality_**

Governments’ attempts to keep domestic prices artificially low can reduce the quality of service substantially in the downstream oil sector. Examples include long queues, flourishing black markets with much higher prices, adulterated fuels, and sometimes outright fuel outages with no fuels available at any price. Conversely, moving to market-based pricing could reduce or eliminate the financial incentives and causes of the low quality of service and transform the market. Some changes are instant; others take longer.

Adulteration of automotive diesel with kerosene can be stopped instantly if the price of kerosene is raised to the price of diesel. Black markets may disappear if official prices are raised sufficiently; the size of a black market is inversely correlated with the price difference between the official fuel prices and prices on alternative markets, capped by import-parity prices. Fuel shortages may also disappear altogether if prices are raised to market levels. Short-selling is common in many markets, and is another way by which consumers pay more than the official prices. Raising official prices but clamping down on short-selling can reduce the adverse effects of price increases. Shortages may persist for a while in exceptional circumstances: if the supply infrastructure is in disrepair and needs significant refurbishment for normal operation or if suppliers are in financial distress after years of subsidies and need to be recapitalized.

Normalization of fuel supply is readily observable and can be effected immediately, and hence a quick win for the government in price reforms. The more people are affected, the greater are the perceived benefits. Adroit handling of supply deficiencies therefore merits special attention.

# **_Consultation and communication_**

Consultation and communication are essential to the transition to market-based pricing. Nearly all governments communicate about the regressive nature of fuel subsidies, often comparing the total subsidy bill with total spending on education or health. Governments usually go on to explain how the savings from subsidy reduction will be used more equitably.

The content, the timing, and the manner of communication are all important. Resources should be devoted to developing an appropriate communication strategy. Analysis of winners and losers, effects on different segments of the economy as well as households, and how the savings from price reform might help offset the adverse effects of the reform should be undertaken ahead of time and communicated appropriately.

There should be adequate time for the messages to be delivered and feedback to be received. Today, there is a variety of media for having a national conversation about price reform. An important new avenue is the electronic media, which give many people an opportunity to have their say and the government an opportunity to acknowledge their concerns. Aside from the internet, mobile phones have enabled citizens to voice their opinions. Although not related to fuel pricing, one such example is “Mali speaks” in a country where less than 3