Iran's fuel consumption reduces after subsidy cut

Business Materials 16 February 2011 12:34 (UTC +04:00)

Azerbaijan, Baku, Feb. 16 / Trend, A.Yusifzade /

With the reform plans that Iranian government began implementing from Dec.19, 2010 the total consumption of four main fuels, including gasoline, kerosene, fuel oil and diesel has reduced by 1.3 billion liters, FNA reported.

NIOPDC data show that within forty two days of implementation of the targeted subsidies bill, Iran's daily gasoline consumption declined by six percent on average to 55.9 million liters.

Before the cuts, subsidies ensured Iranians some of the cheapest gasoline in the world, at about 10 cents per litre (38 cents per gallon). Under the reduced subsidies and the rationing, each person can buy up to 60 litres (15 gallons) a month of gasoline at the equivalent of $40 cents a litre ($1.50/gallon), and for any amount above that the price is about 70 cents per litre.

The targeted subsidy plan, aims to gradually remove all subsidies over a five-year period and instead give families cash handouts as compensation.

The plan eliminates subsidies on gasoline, natural gas, electricity and food.

The Iranian government also said in an announcement that it will also cut subsidies of diesel, kerosene and water.

Supporters of the plan say it is in line with global financial organizations' recommendations that Iran get rid of a heavily subsidized economy if it wants to solve its economic problems. But, some analysts have criticized the plan, saying it could trigger a hike in prices and stoke up inflation in the country.

Energy subsidies have cost Iran $100 billion a year.