Finance Ministry Targets Public Company Reform to Cut Rising Energy Subsidies

The Ministry of Finance and Public Enterprises has launched a strategic initiative to overhaul the management of state-owned companies in an effort to curb the nation's escalating expenditure on subsidies. Speaking on PSM News’ ‘Raajje Miadhu’ programme, Deputy Minister of Finance and Public Enterprises Ahmed Saaid Musthafa identified electricity generation as the state's largest financial burden. Despite soaring global oil prices, the government has absorbed these costs to shield consumers from tariff hikes, leading to a significant strain on the national budget. While the government initially allocated USD 64.9 million for energy subsidies this year, Deputy Minister Saaid warned that this figure is likely to be exceeded due to recent volatility in the Middle East. He noted that while increasing electricity tariffs is one method to reduce subsidies, such a move must be carefully targeted to protect vulnerable populations to avoid inefficiency and undue hardship. To ensure sustainable service delivery without compromising quality, the administration is prioritizing a transition to renewable energy, aiming to source 33 percent of the country’s energy consumption from green alternatives. However, the Ministry acknowledged the logistical hurdles of this transition, citing the need for substantial land or lagoon space and complex technical installations across the islands. As a short-term solution, the government is pushing for technical upgrades to existing power plants to lower generation costs. This include replacing high-speed diesel engines with more efficient medium-speed alternatives in larger urban centers across the atolls. The Ministry is currently coordinating these efforts with the State Electric Company Limited (STELCO) and Fenaka. In a move toward greater centralization and operational efficiency, the government has already begun restructuring public enterprises. Under a new agreement, STELCO will assume responsibility for water, electricity, and sewerage services across 25 islands in the Baa, Lhaviyani, and Meemu Atolls. This restructuring is expected to streamline service delivery and reduce the systemic waste that currently drives up subsidy costs.