Iraqis will receive their first 1,000 kilowatt-hours of electricity for free each month, the Ministry of Electricity said on Saturday, following growing protests over poor electricity supply and basic services.
In the most recent demonstration, hundreds of people gathered in Baghdad on Friday to protest shoddy services and sporadic power, as turmoil rocks other parts of the Arab world.
Acting Electricity Minister Hussain al-Shahristani said the subsidy would apply to all Iraqis but was mainly aimed at helping around 8 million low-income Iraqis.
Consumers who use more than 1,000 KWH will pay for what they use over the exempted amount.
Last October, Iraqis began receiving electricity bills containing a 100 percent price increase following a government decision aimed at encouraging consumers to economize and to help tackle crippling power shortages. The price rose from 10 to 20 Iraqi dinars, less than $0.02, for the first 1,000 KWH.
Under the new pricing scheme, consumers will pay 50 dinars per KWH for between 1,000 and 2,000 KWH, 80 dinars for between 2,000 and 3,000 KWH, and higher tariffs for higher amounts.
Electricity demand in Iraq has risen since the 2003 U.S. invasion but the national grid still only supplies a few hours of power per day, a major cause of discontent in a country that sits atop some of the world's biggest oil reserves.
"Iraq's current production is 7,000 megawatts, while actual demand is 12,000 megawatts, so we have a shortage of 5,000 megawatts," Shahristani told reporters.
Iraq has big plans to install turbines and capture gas at oilfields to ramp up electricity production, and needs to spend $77 billion to improve the power sector by 2030, according to a master plan.
Shahristani said power imports from Iran will be increased to 800 megawatts from 500 megawatts, while talks are being held with Turkey and Syria to import about 300 megawatts more.
Rehabilitation and maintenance work on existing power stations will supply an additional 1,500 megawatts before this summer, Shahristani added.
"Despite all efforts, our production capacities will stay below required level needed for next summer", he said.