Abadi: Privatization of electricity to protect the poor from the mafias of generators

Abadi: Privatization of electricity to protect the poor from the mafias of generators

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The Iraqi government has begun to privatize the electricity sector in recognition of its local obligations and needs. The problem of electricity is the increase of the demand on it, which is estimated to reach 35,000 megawatts by 2030.
The electricity shortage in Iraq is due to the depletion of state-owned generators due to international wars and sanctions in the 1990s, and electricity costs the Iraqi economy billions of dollars a year.
The electricity sector faces challenges in production, transportation, distribution and efficient management, thefts and excesses due to the high levels of energy consumers without the presence of meters and the absence of an effective collection system and the failure to collect the financial dues from the electric bills. This led the Iraqi government headed by Haider Abadi, the reformer of sectors of the state and the warrior to corruption, to discuss privatization.
Abadi stressed that the parties that raise public opinion against the privatization of electricity, are Mafias that get hundreds of billions of beneficiaries from private generators at the expense of the citizen’s income, calling for awareness of Iraqi citizens that privatization for the benefit of citizens, especially the poor and middle classes.
Abadi said that the privatization of electricity is an investment that it does not put pressure on the low-income, “but the contrary is in their favor, noting that” Iraqi governments have spent billions of dollars previously on electricity and did not resolve the dilemma, and the citizen continues to pay for civil generators. ”
Abadi said that the privatization will activate the “project of collection for the benefit of citizens to stop wasting.”
Abadi said “There is exploitation by the owners of the generators, revealing the presence of mafia of generators and political parties and officials who have distributed generators and have a share in them “. He added “They want to disrupt the project of the collection, and the government will work hard against the corrupt group.”

The Iraqi experts working in the field of energy confirmed that electricity in the country for more than a decade, “turned into a field of failed experiments,” and this encourages the Iraqi government to transfer this file to the private sector to prevent the waste of public money.
They pointed out that the Iraqi government is working to develop the project of privatization of the electricity sector because of the failure of state institutions «which proved to be dirty and ineffective, and provide services of low quality at high cost».
Reform in the electricity sector by privatization is necessary to meet domestic needs and attract investment, which is hampered by the lack of necessary infrastructure.
In the same context, the Ministry of Electricity revealed the loss of 70% of the subsidized fuel, which provides for 30 thousand electric generators and sold on the black market, and the Directorate of Electricity Distribution Basra said that the investment of collection in the province will provide energy to the city in full and the government price itself supported by the state.
“We seek employment for all, but we want productive jobs and social security,” Abadi said.
“The aim of the Social Security Law is to provide a guarantee for those who are outside the government job to guarantee their future, but some of them are fighting for public money,” Abbadi said. “There are MPs who receive two salaries and more. We want to provide financial security for all and to remove all obstacles to public investment and to the private sector “.
He pointed out that “the steps of the government to encourage investment starts to reduce expenses because of the drop in oil prices, pointing to the establishment of a high committee to remove obstacles and fight corruption.”
The spokesman of the Ministry of Electricity, Musab al-Mudaris pointed out that the privatization of electricity collection succeeded in some areas of Baghdad significantly and provided electricity to the neighborhoods of the capital throughout the day and at a lower cost than generators eligibility, where the State subsidizes the price of fuel to operate 18,700 civil generators and 6000 government generators and 1,800 generators for the industrial sector , And all these generators take its fuel at a price subsidized by the General Company for the distribution of petroleum products , which 70% of it is sold on the black market.
Al- Mudaris pointed out that the black market traders who deal with subsidized fuel stand against the privatization of electricity collection, because when these generators stop , the supply of them with subsidized fuel will be stopped and this means hitting the interests of the beneficiaries of the current situation.
Local residents in the Zayouna district of Baghdad say they were initially “apprehensive” about the privatization of the collection in their area, but soon enjoyed the power of their homes throughout the day without interruption.
“The privatization of the collection of electricity funds ensured the maintenance and repair of faults in the correct manner and at a standard time and read the electrical measurements electronically and end the state of random assessment to read the standards.”

On the other hand, the maintenance engineer at the Directorate of Electricity Distribution Baghdad Rusafa, Hashim Karrar said , that “the privatization of the collection has assisted the Directorate to a void many problems of abuses on the distribution network because the investment companies ensured to remove the abuses and resulted in the easing of loads on the electricity network and rehabilitation of the other ones in the old residential areas “.

The Ministry of Electricity said that “the proportion of government support in this project up to 94% for those who consume less than 500 units and less support with increased consumption.”
“The province of Basra signed contracts to privatize the collection of the area north of Basra and the residents of the province will be provided 24 hours a day of electricity.
Rahim explained that the project, which succeeded in a number of areas of Iraq, is rejected by some of them, but we are working in cooperation with civil society organizations, universities and the media to raise awareness of the citizens of the importance of the project of collection which will provide electricity continuously.

And the concerns of the people about the privatization of the collection , Rahim said “The fears are legitimate because they did not try this global system but it will certainly be a good experience for us in Basra,”. “The electricity pricing is the same as that approved by the federal government and the Ministry of Electricity on January 1, 2016,” he said. There is no financial increase.

On the other hand, and the importance of the private sector in reducing the deficit in the budget of 2018, the economic adviser to the Prime Minister Mudher Mohammed Saleh confirmed that the government is seeking to increase non-oil revenues in the budget to achieve a balance between government spending and state revenue.
Saleh pointed out that “the government’s intention to apply electricity tariffs on all Iraqi provinces early next year to reduce the financial waste in the electricity sector and support the poor class in society.”
He explained that “the electricity sector consumes 14 trillion Iraqi dinars from the budget of the federal government, while the financial receipt of the collection is one trillion Iraqi dinars because of the lost and the great waste of inefficiency of the economic electricity sector.”
Saleh added that “the generalization of privatization experience in the collection sector will reduce the continuous waste and increase the hours of processing electricity without affecting the low-income strata of society.”
In order for privatization of electricity to be carried out, the privatization contracts included the investor’s commitment to the following:
1 – To supply a smart meter system to replace the mechanical standards of all consumers, in the area covered by smart meters, and the installation of new smart meters for new consumers, to be compatible with the system of central smart meters carried out by the Ministry.
2 – Obtain the reading of energy consumption measures for all types of consumers, including government monthly, as the work cycle will be monthly.
3- The collection of the amounts of sold energy and wages, if it exists that will appear in the lists of consumers in all their categories in the covered area and according to the tariff determined by the Ministry of Electricity and applying the government decisions. The Ministry shall determine the amount of received energy through the meters installed on the feeders of 11 KV at the transfer stations which feed the covered area and form the basis for determining the amount of received energy.
4 – Payment of amounts collected on a daily basis according to cash delivery mechanism.
5- Working according to the central consumer system
6 – collect the debts of electricity wages.
7 – Provide the service management of the electrical network to covered areas and maintenance.
The contracts also included:
1- The investor’s commitment to the establishment of the buildings and the rehabilitation of the centers to be owned by the Directorate.
2 – Establishment of independent maintenance centers for the areas and equipped with furniture and equipment, computers and means of communication and the Internet and a paper shredder.
3 – Establishment of a typical collection center for cash, equipped with furniture, computers, printers, communications and the Internet
4 – Rehabilitation of local maintenance centers and the establishment of new centers instead.
5 – Provide the necessary supplies at the headquarters of sales directorates, the Center for Systems and Consumer Operations Research.
6 – Operating 80% of the staff of the concerned Directorate.
7. Provide the mechanism necessary to implement all technical obligations.
8 – The investor shall bear the value of administrative missing, if it exists.
9 – The investor is committed to contract with a specialized consultant to approve all the statements and designs, and obtain ISO certificate for all disciplines within a period not exceeding 24 months from the date of the contract.
The Ministry of Electricity has set other requirements for privatization proposals, such as:
1- There shall be a period of preparation and transfer of the network administration for a period of three months, starting from the date of signing the contract, including a common inventory of the components of the network, determining the financial value of the network and its components, conducting a joint field investigation and diagnosing the technical needs of the emergency to improve the performance of the electrical network such as crowds and expansions and the installation of protection equipment and load balancing, the removal of direct abuses on the network, the implementation of the standards of the contract at the minimum and acceptable, and determine the cost of the overall rehabilitation with the value of the percentage of monthly fee for the work of rehabilitation.

Shatha Khalil
Economic unity
Rawabet Center for Research and Strategic Studies