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Oman Business News

25 per cent jump in government subsidy to power sector in 2018

Government subsidy to Oman’s burgeoning electricity sector jumped 25.4 per cent to reach a value of RO 476.6 million last year, up from RO 380 million a year earlier.

The hefty increase was spurred by high growth in the commercial and residential segments of the market, the Central Bank of Oman (CBO) noted in its 2018 Annual Report published here last week.

According to the Authority for Electricity Regulation (AER), customer accounts across all classes jumped 6.3 per cent to 1.2 million in 2018, up from 1.14 million accounts a year earlier. Residential customers, all of whom enjoy subsidy, accounted for nearly 70 per cent of the growth.

The electricity and water sector continues to be heavily subsidised by the government, although moves are afoot to reduce the financial burden on the state through indirect methods, such as promoting energy efficiency, transitioning to renewables, rationalising consumption, and so on.

In dramatic contrast, government fuel subsidy amounted to around RO 20 million in 2018, down from a peak of RO 1.134 billion in 2014, just before a landmark decision by authorities to deregulate fuel prices and rollback long-standing financial support for this sector.

The only subsidy on fuel prices is presently channelled via the National Subsidy System (NSS), which provides fuel at a marginally subsidised rate, subject to a limit of 200 litres per month, to Omani owners of vehicles with monthly incomes not exceeding RO 950. Omani fishermen are also entitled to subsidised fuel.

An estimated 340,000 Omanis registered under the National Subsidy System, although not all of them are current beneficiaries of this scheme.

From the highs that prevailed before the global oil price shock of 2014, fuel subsidies have drastically declined in the Sultanate. According to Ministry of Finance figures, government financial support dropped by more half to RO 479.3 million in 2015, plummeting to RO 17.1 in 2016 when the National Subsidy System came into operation. In 2017, the subsidy was RO 21 million.

Also in 2018, subsidy provided by the government in the form of soft loans to the private sector, and housing support, amounted to RO 25.9 million, up from RO 25.2 million a year earlier. Importers of grain for the nation’s two main millers enjoyed some modest subsidy as well.
  • Oman
  • Government Subsidy
  • Electricity Sector
  • Central Bank of Oman
  • Annual Report
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