05/01/2013 08:29 AST
The Omani government has earmarked a total of RO 1.335 billion to subsidise a range of products and services as part of the 2013 budget allocations for 2013. This compares with an aggregate subsidy allocation of RO 1.431 billion announced in the 2012 budget. A year earlier, the subsidies totalled RO 1.725 billion, up from RO 1.392 billion in 2010.
Of the subsidies announced as part of the 2013 Budget, the lion’s share — amounting to RO 740 million — has been earmarked for fuel products, including gasoline, diesel and cooking gas. This year’s subsidy towards fuel products has been calculated based on an assumed price of $85 per barrel of crude. In contrast, fuel-related subsidies totalled RO 955.6 million in 2011.
The power generation sector, also a major beneficiary of government financial support, will receive RO 260 million in subsidy during 2013. Similar aid to the potable water desalination and distribution sector is estimated at RO 159 million this year.
Customs duty waivers granted to certain industrial projects amount to RO 80 million this year. Interest waivers on housing and development loans are estimated at RO 35 million. Other areas set to benefit from government financial assistance are: basic foodstuff (RO 23 million), animal feed (12 million), and fishing and farming (RO 6 million).
In addition, the state-owned National Ferries Company will receive a grant of RO 9 million as subsidy towards its operations. Likewise, the government will provide Oman Air in funding support towards the operation of flights to Salalah and Khasab.
At a press briefing on Wednesday to announce the 2013 Oman Budget, Darwish bin Ismaeel al Balushi, Minister Responsible for Financial Affairs, said the burgeoning size of subsidies, particularly towards petroleum products, was of growing concern to the government.
The issue of fuel subsidies, which reached nearly RO 1 billion, requires careful review and consideration, he stressed, noting that the amount could be better utilised for employment generation, training of Omanis, and improving the livelihoods of nationals.
Cheap fuel also has a potential downside, he warned. It could contribute to profligate consumerism, particularly where car-buying is concerned, thereby sparking a proliferation of vehicles on the roads, and inevitably a rise in traffic accidents, which reap a heavy burden in lives and healthcare costs, he noted.
Al Balushi also lamented that some firms had sought to exploit the subsidy situation by exporting subsidised Omani fuels to other countries in the region for a hefty profit. Court action has since been initiated against such firms to recover an amount of RO 35 million earned through such means, he said.
Acknowledging that any review of the subsidy regime is the prerogative of the Council of Ministers, the Financial Affairs and Energy Resources Council, and other such bodies, and not the Finance
Ministry per se, he nevertheless stressed that the question of financial support for fuels should be carefully weighed.
“The objective is not to take away subsidies completely, but to ensure it goes to those sections of the population that are most deserving. We should also correct the current system that allows certain companies to unjustifiably benefit from these subsidies,” the Minister added.
Oman Daily Observer
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