UAE mulls gas and electricity subsidy cut

24 January 2016

Move is part of a wider strategy reduce burden on the government budget amid shrinking oil revenues

The UAE is considering the ending of subsidies on electricity and gas sold to power generation companies, as the second-largest Gulf economy implements a wider strategy to reduce burden on the government budget amid shrinking oil revenues.

“Consumers need to pay the real price. They already do so for petrol and diesel, and electricity is still to come, and we will look at the subsidised sale of gas to power providers,” local Gulf News quoted Energy Minister Suhail al-Mazroui as saying at the World Economic Forum in Davos, Switzerland.

The impact of removing subsidies on domestic electricity would not be that great on the consumer, as it only really applies at the higher levels of use at present.

Al-Mazroui also added that once subsidies were removed and the prices were at standard world levels, the source of the fuel would cease to matter and providers could use UAE gas or import it.

The UAE, along with other Gulf peers, relies heavily on sale of hydrocarbons for revenues. The GCC six-member economic bloc is grappling with a slowdown in economies as oil prices have lost about three quarters of their value since mid-2014.

“Since its inception, the UAE has sought diversification from oil, and even though oil revenues will always be there, we need a vibrant economy independent of oil,” Al-Mazroui said.

The country plans to reinvest the saving from removal of subsidies into building infrastructure, schools and healthcare facilities.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications