New mechanism for electricity fee collection
Electricity ministry’s expenditure ten times as much as revenues
The revenues of the Ministry of Electricity of the Kurdistan Regional Government (KRG) are estimated at IQD 250 billion (approximately US$ 200 million) for this year, while the planned expenditures amount to IQD 2.5 trillion (approximately US$2 billion). This means that the government contributes 90% of the power generation costs while consumers contribute only 10%. This is in stark contrast to the official target that government’s share in the expenditures of this sector should not exceed 20%.
In a letter dated July 25th 2012, the electricity ministry states they will need 3.2 billion liters of diesel, and 378 million liters of other kinds of fuel for operating the privately-owned power stations all over the region.
This is in addition to 45 million liters of diesel that are reserved for urgent needs in case of emergency or when the gas system is down for any reason.
As per the contracts between the government and the private power stations, the former has to provide the fuel free of charge, with the price of fuel at approximately US$ 1 per liter.
Nasik Tofiq, member of the Kurdistan Region’s Parliament on the Kurdistan Islamic Union Bloc, told the Kurdish Globe that the electricity ministry retains all its revenues.
“The revenues collected in each province will be retained by the electricity directorate general of the province,” MP Tofiq explained.
MP Dler Mahmoud, member of the parliament’s finance committee, argues that the huge gap between the revenues and the costs of power production in the region puts pressure on the government’s budget.
MP Mahmoud also argued that the KRG has put a lot of emphasis on designing a suitable mechanism for collecting the electricity revenues in the New Year with view to striking a balance between the government’s expenditures and revenues.
In addition to the expenditures of generating electricity at the ministry’s power stations including fuel costs and fuel supplied from the refineries in the region, the government has to also pay for purchasing back the electricity generated at the private power stations and sell it at a subsidized price to the households, government agencies, and other commercial, agricultural, industrial and tourist projects.
All this needs a huge budget and is a massive burden on the government’s budget.
Statistics available at the ministry indicate that since January 1st 2009 the government has spent around US$ 2 billion in subsidizing power distribution and has produced 1.4 thousand megawatts of electricity.
The most striking reality is that the electricity demand is increasing on a daily basis, which means higher expenditure rates.
The government had allocated around IQD 136 billion for gas and electricity production while this rate was more than IQD 1.6 trillion in 2012.
A view of a power plant in Kurdistan.