86 In addition to a lifeline rate for residential consumers consuming less than 100 kWh a month, a second category of a lower lifeline rate for those consuming less than 50 kWh a month was introduced in January 2014 (IMF 2014m; <u>http://www.steg.com.tn).</u> The prices of petroleum products were lowered in 2009, raised twice in 2010, and then once a year in 2012, 2013, and 2014. Against the backdrop of the political turmoil in Tunisia and sweeping across the rest of North Africa, no price adjustments were made in 2011. None of the individual price adjustments exceeded 10 percent; the highest increase was 8.6 percent for diesel fuel in December 2010.

In January 2014, the government introduced a new pricing formula, which would raise domestic prices by TD 0.1 (US$0.06)/liter if international prices increase by DT 10 (US$6) per barrel—TD 0.063 (US$0.04)/liter—in a quarter. The authorities had planned 3‐percent increases in March and September 2015 for the prices of petroleum products, and 7‐percent increases for the electricity tariffs of medium and low‐voltage consumers in January 2015, but the electricity tariff increases were canceled. Because world oil prices had fallen far below the prices assumed in estimating subsidies, petroleum product price increases were not implemented, although the prices of kerosene and LPG for household use remained heavily subsidized. In December 2015, the Ministry of Industry, Energy, and Mines stated that the government would start applying a new automatic pricing mechanism in January 2016, with the first fuel price adjustments to be applied in July 2016 (Kapitalis 2015).

An audit of energy firms presented to the council of ministers in August 2014 found a complex web of cross‐subsidies. Among them is a large subsidy historically provided through an artificially low price of crude oil sold by the national oil company to the state‐owned refinery, fixed at TD 50 (US$34–40 depending on the exchange rate) per barrel irrespective of the world price of crude. The government was to eliminate cross‐subsidies for the two companies by January 2015 (World Bank 2013b, IMF 2014m). The estimation of the subsidy reimbursable to the refinery is further complicated by the fact that half of its production is exported (fuel oil and naphtha). In 2014, the refinery did not produce gasoline and imported it to meet domestic demand. While the refinery produced enough fuel oil to meet domestic demand, almost all of it was exported while imported fuel oil was used to meet domestic demand (presumably to take advantage of sulfur content or other quality differences). The net result is that, while the refinery produced half of the total domestic demand in volume in 2014, the country imported more than three times the amount of locally refined products sold on the domestic market (http://www.stir.com.tn).

The government is taking concrete steps to strengthen social safety nets as part of the overall reform program across the economy. The government in mid‐2014 introduced a support program for households that increased transfers to the vulnerable by 10 percent; aimed to broaden the number of beneficiary families by 30,000 between 2013 and the end of 2014; provided a temporary transfer of TD 80 (US$55) to 285,000 families when fuel prices were increased and during the Ramadan; and provided an additional transfer of TD 10 (US$7) per month per child, up to three children per family, to vulnerable families with schoolchildren. In addition, similar to the scheme in India, the authorities are setting up a unique social identification number for each citizen, which could be used to register vulnerable households (IMF 2014i, 2015k).