Saudi Arabia urged to end water subsidies

Saudi Arabia needs to remove heavy government subsidies on water consumption to save dwindling resources and cut demand, one of the highest rates in the world, the Gulf Kingdom’s largest bank has said.

High domestic demand has allied with subsidies and low rainfall to sharply depress the desert country’s water wealth, prompting efforts by the government to conserve such resources and pump heavy investment into the water sector, National Commercial Bank (NCB) said in a study sent to Emirates 24/7.

The study put sweet water consumption in Saudi Arabia, the world’s largest oil reservoir, at around 22.7 billion cubic metres in 2009, an average of more than one million cubic metres per person.

It referred to the Kingdom’s recently approved 2010-2014 development plan, which involves investment of SR162.9 billion in development of water resources, part of a SR500-billion plan for the power and water sector in 10 years.

“In our opinion, imposing more regulation on agricultural activities coupled with removing the subsidies on water are possible solutions to save the strategic water resources,” the study said.

It noted that the agricultural sector has remained by far the largest consumer of water resources in Saudi Arabia despite its low contribution to the country’s gross domestic product, the largest in the Arab world.

In 2009, water consumption was estimated at 22.7 billion cubic meters, where 85.3 per cent of total consumption went to agricultural purposes, 11.1 per cent to municipal purposes, and 3.6 per cent to industrial sector, it said.

“While the agricultural sector consumed more than 85 per cent of total water consumption, its contribution to GDP in nominal terms was only around three per cent in 2009. This could be explained by the fact that most farms and agricultural businesses are run by either families or small companies,” it said.

“Interestingly, Saudi Arabia is ranked the third largest consumer, with daily per capita water consumption amounting to 248.7 liters.”

The report attributed the poor water resources in Saudi Arabia to the “very” low rainfall, estimated at 70-100 mm per year, the growing demand for water as population grows at high rates, nearly 2.3 per cent in 2009 and the fact that water is subsidized by the government; thus demand is artificially high.

NCB did not mention Riyadh’s decision two years ago to halt local wheat production and rely on imports from foreign markets to preserve its water wealth.

The Kingdom, which sits atop more than a fifth of the world’s proven oil wealth, had produced nearly three million tonnes of wheat per year to meet domestic needs but output is expected to plunge to one million tonnes this year following the government’s decision to stop subsidizing local production.

 In the next two years, output could dip further and the country will become almost totally reliant on imports, mainly from the West.

To meet its fast growing water needs, Saudi Arabia has resorted to the construction of costly sea desalination plants and investments in the next development plan will cover expansion of existing units and new facilities.

As a result, the Kingdom is the world’s largest producer of desalinated water, which meets over 70 percent of its present drinking water needs.

The country’s 30 desalination plants pump more than 600 million gallons (2.27 billion liters) of water daily (over one billion cubic meters a year) through nearly 2,000 miles of pipeline. More than 50 cities and distribution centers in Saudi Arabia receive their water from these plants.

Industry sources expect desalination to remain a major industry in Saudi Arabia for generations to come. The government is planning to build 16 water desalination facilities worth $14 billion over the next 17 years. These facilities will have a combined capacity of 2.1 million cubic meters of water a day.

The funds are part of a massive $60-billion investment programme involving the expansion of water distribution networks, construction of new desalination units, and maintenance of existing facilities.

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