MANAMA: The Kingdom of Bahrain on Monday has decided to lift $1billion yearly subsidy from the power and water sector from March this year.
This was announced by the Minister of Energy who is also holding the portfolio of Ministry of Electricity and Water told the post cabinet media briefing that the subsidy would be lifted in phases over next four years starting from the March this year.
The Cabinet has endorsed the proposed subsidy lifting plan and directed the concerned authorities to take necessary measures to see the smooth implementation of the plan.
Dr Mirza who joined the Minister for Information Affairs Isa Abdulrahman during the regular post Cabinet weekly briefing said that the decision to this effect had been taken carefully not to pass on the burden on to the nationals.
“The Government has made sure that subsidy should not affect the nationals however if Bahrainis were using this facility for some commercial gains then they have to share the burden of cost of production,†the Minister added.
The Minister said that the Government’s decision would help in reducing the borrowings as well as narrowing the gap between the income spending which had been widening since the oil prices start tumbling from June 2014.
“The Kingdom’s of Bahrain’s 83% income comes from the oil and the oil prices which are at its lowest since 2004 at $34 per barrel has forced the Government to take action on the subsidy,†the Minister said.
power sector embarks on new era of development
The Kingdom of Bahrain has embarked on a new era of modernisation and development of the existing power infrastructure to meet the growing demand due to rising population and upcoming industrial projects.
Earlier, the Government had announced a multi-billion dollar investments in the power and water sector by the year 2020 in this the private sector role remains crucial in implementing the strategy especially at a time when the public sector spending is squeezing due to the persistent low oil prices.
The private sector’s participation in power and water sector reflects Bahrain Government’s national strategy which clearly spells out outsourcing most of the electricity and water production facilities to the private sector. The private sector is responsible for around 80% of the total electricity generation capacity and has been in the form of Independent Power Production (IPP) or Independent Power and Water Production (IWPP). The official studies indicated that involvement of the private sector will reduce the public exchequer bill, in form of salaries of the staff, low expenditures on maintenance side while bringing more efficiency through an open competition.
Statistically, Al-Dur Electricity and Water Company (ADEWC) owns nearly 31% of the power generation capacity in Bahrain and Hidd Power Company (HPC) and Al Ezzel Power Company (AAPC) owns each nearly 24% of the power generation capacity.
The official believe that the private sector investment in the electricity and water infrastructure is very much safeguarded by the Government through legislation and the government guarantees in the form of the long term power and water purchase agreement with the private companies. Where the government is trying to enhance the scope of attracting foreign investments or stirring domestic investments by making power sector an attractive sector, the power and water sector is facing great challenges including the massive growth in demands and the associated required expansions of the networks and the investments to satisfy these demands to achieve the required performance standards as spelled out in the Electricity and Water Authority’s (EWA’s) corporate plan and the National Strategy 2030.
In line with the national strategy and the guidelines from the leadership for ensuring the provision of basic facilities such as power and water, the power sector faces main challenges i.e. how to maximise the utilisation of available financial resources and how to reduce production cost of the electricity unit delivered to the customer as well as reducing the gap between the level of the cost and the average cost of unit sold. This triggers a new debate whether the current model of subsidy in power sector should be revisited by the government to gradually lift the subsidies and make it a self-sustainable sector by reducing the gap between the production and selling cost. There are various opinions that such high demand for power is not only attributable to the ensuing fast economic growth, but may also be as a result of the cheap tariffs which may encourage wastage, with the resulting depletion of the natural and financial resources, at the expense of social and economic development.
The Government is required to address the increase in demand for the financial resources available for the sector through strengthening the collection of the debts efforts and the consideration of adoption of tariffs closer to the cost, thereby leading to a greater awareness on the part of the consumers of the consumption patterns and enforcement of few initiatives to enhance consumption efficiency, conservation, and load management. EWA is working on introducing various awareness campaigns for the conservation of energy, electricity and water.
The Kingdom of Bahrain’s available generation capacity at the moment is 3922 MW during high peak summer season, the EWA had around 600 MW of spare emergency import capacity via the GCC interconnection from neighboring countries, which can be imported in emergencies or via prior arrangements.
Domestic sector consumption makes up around half of the total energy sold in the system. The domestic consumption pattern is very sensitive to the climatic conditions and hence the consumption shoots up during the summer period (May to October). Air conditioning alone is responsible for more than 60% of electricity consumption and this demand is very seasonal during the summer where people use air conditioning on a large scale.