Subsidy to Oman’s power sector slides 7.5pc to RO 569m

Electricity supplies to predominantly residential customers in the Sultanate of Oman were subsidised to the tune of RO 568.64 million last year, according to Nama Group, the state-owned grouping of power, water and wastewater service providers.

The amount was lower by 7.5 per cent compared with the previous year’s figure of RO 614.98 million – a reflection of subsidy reform under way in the power and water sector.

Government grants to the sector are expected to be completely phased out in line with fiscal reforms initiated in 2020 under the Medium Term Fiscal Plan. It stipulates a complete rollback of all power and water subsidy to all categories of consumers over a four-year timeframe spanning the 2021 – 2024 period.

Under this programme, effective from January 1, 2021, expatriate residential customers have been charged subsidy-free cost-reflective tariffs for their electricity consumption. For citizens, however, the subsidy is being progressively reduced on an annual basis before it is completely phased out by 2024. However, citizens in low-income groups will remain covered by a safety net.

Significantly, the water and wastewater sector, which was incorporated into Nama Group last year, received a subsidy of around RO 136.355 million last year, down from RO 198.437 million in 2020.

Oman Water and Wastewater Services Company (OWWSC), the product of a merger between the Public Authority for Water (Diam) and Haya Water, was brought under the umbrella of Nama Group following the restructuring of the country’s water and wastewater services sector.

Notably, government subsidy accounted for a sizable chunk of total revenues generated by Nama Group subsidiaries in 2021. It accounted for 49 per cent of total revenue of RO 1.412 billion earned by the Group last year. In comparison, the subsidy accounted for a 41.8 per cent share of the group’s total revenue of RO 1.330 billion in 2020.

The subsidy paid by the government per unit of electricity supplied last year declined to RO 15.9 per Megawatt-hour (MWh), down from RO 18.6 per MWh in 2020. On average, every customer earned a subsidy of RO 418 in 2021, which was around 10.5 per cent lower than the corresponding figure of RO 467 per customer in 2020.

Of the five electricity distribution companies that received subsidy last year, the biggest beneficiary was Mazoon Electricity Company (MZEC) with RO 204.922 million in government support. Mazoon, with around 489,000 customers, is also the largest supplier based on its sizable customer base.

Muscat Electricity Distribution Company (MEDC), with around 427,000 customers, received RO 107.439 million in support last year, followed by Dhofar Integrated Services Company (around 272,000 customers) with RO 41.812 million. The Rural Areas Electricity Company (Tanweer) received subsidy support of RO 106.062 million (around 46,500 customers). The remaining 19.06 per cent share of the total subsidy went to Majan Electricity Company (MJEC).