This article revisits the recent evidence on the state of reforms and innovative pricing and subsidies
schemes to unravel the hiatus between the theory and practice of pricing and subsidies policies and sectoral reforms in developing countries.
The energy sector reforms commencing in the 1990s in developing countries were aimed at reducing
the inefficiency of the sector and remove the energy supply and financial deficits that impeded social
and economic progress in these countries. It gradually became evident post-reform that the restructuring,
market reform, and institutional reform of the sector, though necessary, were not sufficient to ensure the
socio-economic success of the market-oriented reforms.
Instead, the pre-reform pricing and subsidy schemes had partially acheived their economic and social
purpose. However, the burden of the policies grew to unsustainable levels and became the source of
many ills of the sector and the economy such as poor technical and financial performance of the sector
and ballooning fiscal deficit leading to the need for subsequent changes. Energy subsidies were increasingly serving the better-off groups leaving no surplus to increase the quantity and quality supply and
extend the service to those deprived of access to modern commercial energy in many countries.