Oman’s water sector subsidy dips to RO 154m in 2019

Government subsidy paid out to the Sultanate’s rapidly expanding water sector declined marginally last year to RO 154.2 million, down from RO 155.9 million a year earlier, according to the Public Authority for Water (Diam).

State subsidy to the water sector has been on the downtrend in recent years in line with Diam’s mandate to, among other objectives, dramatically reduce government assistance to the industry. From a high of RO 185.7 million in 2016, it dipped to RO 172.3 million a year later, before sliding to a new low of RO 155.9 million last year.

Commenting on the sector’s reduced dependence on government subsidy, Dr. Abdul Malik bin Abdullah al Hinai, Chairman of the Board of Directors, said: “Diam requires subsidy from the government as revenues collected from customers do not match the costs of providing the services. The total amount of subsidy required by Diam has fallen again for 2019 to RO 154 million by 1 per cent. This is now the third successive year that a fall in total subsidy has been achieved.”

Dr Al Hinai attributed the subsidy reduction to, among other factors, enhanced operational efficiency of Diam’s assets, cost-competitive procurement of water from producers, and reductions in ‘unaccounted for water’.

“These savings have been achieved while supplying more water to more customers; the subsidy required per cubic meter delivered was RO 0.93 per cubic meter in 2016 compared to RO 0.51 per cubic meter in 2019. Diam is confident that this will continue to decrease as a result of further efficiencies being delivered,” he stated in the Chairman’s foreword to the recently published 2019 Annual Report.

According to Diam, water tariffs set by the government make it near impossible for the state-owned utility to recoup the cost of supplying potable water to its vast customer base.  The difference is borne by the government in the form of subsidy.

An estimated 386 million m3 of potable water was distributed through Diam’s networks nationwide in 2019, up 6 per cent from the previous year’s total volume. Around 80 per cent of this volume comes from state-owned Oman Power and Water Procurement Company (OPWP), the sole offtaker of water produced by desalination plants around the country.

Well-fields account for a further 15 per cent share, while the remaining five per cent comes from small desalination plants catering to remote areas lying outside the coverage areas of the country’s main distribution grids.

Diam has also been investing in the development of water distribution networks and expansion of existing ones to cater to the country’s growing demand for piped water access.  Capital expenditure soared 30 per cent to RO 81.5 million last year, up from RO 62.8 million in 2018. The utility also reported a 16 per cent surge in its customer base last year, climbing to 611K accounts, up from 524K in 2018 – the tally bolstered by the transfer of Suhar Municipality’s water distribution assets to Diam’s jurisdiction.