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Subsidy

Article (18) of the Sector Law implements a mechanism through which the Ministry of Finance provides electricity Subsidy calculated by the Authority to Licensed Suppliers on an annual basis. The Authority calculates Subsidy requirements for :

    i. Main Interconnected System (MEDC, Majan and Mazoon).
    ii. Rural Areas Electricity Company
    iii. Dhofar Power Company.

Subsidy is defined as the difference between the economic cost of Supply (including financing cost) and Permitted Tariff (and other) revenue. The present level and structure of Permitted Tariffs does not provide sufficient revenue to remunerate the full economic cost of electricity supply. Subsidy is therefore required to sustain the electricity sector’s operations.

Subsidy = Economic Cost of Supply – Tariff Revenue

Example- 2015 MIS Financial Subsidy (outturn)