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Iran’s subsidy reform plan allocates $4 bln to support domestic production

Iran Materials 10 March 2014 15:26 (UTC +04:00)

Baku, Azerbaijan, March 10

By Fatih Karimov - Trend: The second phase of Iran's subsidy reform plan envisages the allocation of 100 trillion rials (about $4 billion) to support domestic production, IRNA quoted Iranian government spokesman Mohammad-Baqer Nobakht as saying on March 10.

Domestic producers should be supported as production costs will increase with prices of energy carriers rising, based on the subsidy reform plan, he explained.

The Iranian government implemented the first stage of the subsidy reform plan toward the end of 2010 in an attempt to wean the country off food and fuel subsidies. At the time, President Mahmoud Ahmadinejad called it the "biggest economic plan of the past 50 years."

The plan allows the government to gradually slash subsidies on fuel, electricity, and certain goods over the course of five years, with low-income families being compensated with direct cash handouts.

The subsidy reform plan pays 45,500 rials (about $18) to Iranians, eliminating subsidies for fuels and some commodities.

The Iranian parliament (Majlis) approved the government implementing the second phase of the subsidy reform plan at the beginning of the second quarter of the next Iranian calendar year, IRNA reported on Feb. 4.

Mohsen Bahrami Arzi, an advisor to the vice president for executive affairs, said on Jan. 28that the government expects about 30 per cent of Iranian families to give up receiving cash subsidies.

"Currently the number of people who receive cash subsidies is even more than the country's population," he said.

"Many have migrated to foreign countries but they still receive cash subsidies, some have two or more ID cards and some are foreign nationals," Bahrami Arzi explained.

President Rouhani's chief of staff, Mohammad Nahavandian, said in November that the Iranian administration is not going to cut the cash subsidies of rich families since identifying such families is a breach of their privacy.

This is while the budget and planning committee of the Majlis on October 20, 2013 approved stopping 30 percent of cash subsidy payments.

Edited by C.N.

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