New mech­a­nism for elec­tric­ity fee col­lec­tion

Elec­tric­ity min­istry’s ex­pen­di­ture ten times as much as rev­enues

The Kurdish Globe - - FRONT PAGE -

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.

Min­istry’s ex­penses

and rev­enues

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.

Pro­duc­tion vs

pur­chase

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.

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