Bid & Tender
Oman Plans to 'Restructure' Electricity Tariff, Boost Revenues

Date : Jun 09, 2016

Oman has plans to cut subsidies in the electricity tariff in what officials say is a bid to help consumers reduce consumption.


"Yes there are plans. There are studies already done on how to restructure the electricity tariff to make the customers more incentivised to reduce their consumption," said Mohammad Bin Abdullah Al Mahrouqi, Chairman Public Authority for Electricity and Water.


Asked what percentage of the subsidy could be slashed, he said, "It is the restructuring of the tariff rather than a percentage of reduction on subsidies. It's not decided yet when to implement it," he said.


The Sultanate has adopted a range of restructuring on spending and revenues after the fall in oil prices.


Last month officials of government-owned Oman Power and Water Procurement Company (OPWP) said the demand for power in Oman is expected to grow by almost 10 per cent per year until 2019.


"We are forecasting that this year we will still continue to grow (the power demand) at 8 per cent. We are a little bit cautious... we have lowered the forecast, given that we have not seen changes in the subsidy policy yet," Eng. Ahmed bin Saleh Al Jahdhami, CEO of OPWP, told a conference on water and energy in Muscat.


In April Al Jahdhami also made a presentation on the government's subsidy for electricity and water at Majlis Al Shura to acquaint members and staff of Shura of the services provided by the government in the areas of electricity, water and the extent of its contribution to the national economy.


Observers like N Gurumurthy, a financial expert, says the subsidy cuts are timely and essential interventions that government has to take in order to "tide over" the "ballooning" fiscal deficit.


"Despite increase in fuel price, the government will have to face larger fiscal deficit. To narrow that gap, they have to look at all options. It's in line with all the options they have taken so far," he said.


Gurumurthy said the move could push people to reduce consumption of energy.


"They could respond in so many ways. Over time they will get adjusted to the cost-based pricing," the expert said.


"At the moment people have been enjoying subsidized utilities. However, the era of subsidized utilities in Oman may be on the wane. That's the direction the government will move in future. Citizens should learn to live with the new realities," Gurumurthy added.