Power and fuel subsidies soar to RO 870 million in 2023

MUSCAT, JUNE 3

Subsidies on electricity supply and fuel products surged to a total of RO 870 million in 2023, up from a budgeted sum of RO 524 million for the year – a steep 66% increase that underscored the Omani government’s efforts to mitigate the impacts of elevated international oil prices – a key contributory factor – on consumers in the Sultanate of Oman.

According to the final accounts of the State General Budget for Fiscal 2023, the subsidy allocation towards fuel products jumped nearly 10-fold to RO 370 million at the end of the year, up from a budgeted sum of RO 39 million at the start of the year. The Ministry of Finance said the increase was made possible by Royal Directives from His Majesty the Sultan mandating a cap on fuel prices rising beyond a certain threshold.

Accordingly, the retail prices of petrol and diesel continue to be capped at the average rates that prevailed in October 2021, when international oil prices scaled new peaks at the time. Concerned about the knock-on impacts of these price trends on the general population in Oman, authorities have continued to keep the caps in place. Consequently, M91 petrol remains capped at 229 baizas/litre, M95 at 239 bz and diesel at 258 bz.

In addition, thousands of limited-income earners among the national population benefit from a further discounted rate on M91 under the National Subsidy System, first launched in 2020. Suitably qualified Omanis, including fishermen, registered under this scheme are eligible to receive up to 400 litres of M91 fuel per month at a subsidized rate of 180 bz/litre.

Electricity subsidy, on the other hand, climbed marginally to RO 500 million in 2023, up from a budgeted allocation of RO 485 million, the Ministry of Finance stated.

The electricity sector is targeted for price reform, with a goal to roll back all subsidies (save for a targeted, low-income segment) over an extended timeframe. Nevertheless, with international energy prices remaining buoyant, the Omani government has intervened from time to time to keep electricity prices in check, particularly for residential segments.

Earlier this week, the Authority for Public Services Regulation (APSR) announced further cuts in residential tariffs for the summer period spanning May to September 2024.

Significantly, a number of other utilities and services reported higher subsidy allocations during 2023. Notable are the Transport sector, which received RO 100 million in subsidies (up from a budgeted sum of RO 84 million), Solid Waste – RO 66 million (up from RO 66 million), Water - RO 91 million (up from RO 75 million), Wastewater – RO 67 million (up from RO 60 million), and Housing Loan interest subsidies – RO 42 million (up from 23 million). Subsidy on basic food commodities, however, declined to RO 12 million (down from RO 25 million allotted for the year).