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Gulf | Oman

Oman Shura Council opposes fuel subsidy rollback

Move may scupper efforts to ease subsidies that amount to 740 million Omani riyals

  • Staff Report
  • Published: 11:59 August 20, 2013
  • Gulf News

Muscat: A key panel constituted by the Sultanate’s elected Shura Council declared on Monday that it would not recommend any repeal of government subsidies on fuel products.

The announcement is likely to scupper efforts by the government to explore avenues for a possible limited easing of fuel subsidies, amounting to a staggering 740 million Omani riyals (Dh 7.060 billion) during the current fiscal year alone.

Concluding its first meeting of the current term, the Council’s Economic and Financial Committee resolved not to support a possible rollback of the subsidies. Oman News Agency (ONA) quoted the panel’s chair, Sulaiman Bin Ali Al Hakmani, as warning that any possible withdrawal of the subsidies, a privilege enjoyed by the general population from the outset of the country’s ‘rebirth’ as a modern nation in 1970, could have a “number of implications”.

The question of repealing fuel subsidies is a sensitive one for authorities, but the government, of late, has been mulling steps to address what it has termed as the “unsustainable” nature of subsidy payouts.

Earlier this year, announcing the 2013 budget, Financial Affairs Ministers Darwish Bin Esmail Al Belushi said the ballooning size of subsidies, particularly in the form of funding support for the petroleum sector, was of growing concern to the government.

Fuel subsidies, Al Belushi had noted then, could be better utilised for employment generation, training of Omanis, and improving the livelihoods of nationals. Cheap fuel, he also warned, had the potential to contribute to profligate consumerism, particularly where car-buying was 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 health-care costs.

The minister 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.

“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 had observed.

The International Monetary Fund (IMF) has also been urging the Omani government to introduce subsidy reform, stressing its importance to the goal of promoting national productivity and the judicious consumption of resources.

In a recent review of the Sultanate’s economic outlook, the IMF warned that a sustainable fiscal position would be difficult to achieve without targeting generalised subsidies, particularly on fuel prices which, it noted, are “disproportionately benefiting the well-off”.

A gradual alignment with international fuel prices, while ensuring targeted support to protect the poor, would in the long run generate fiscal space for social and other infrastructure investments that will generate jobs and growth, it emphasised.

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