Iran to implement second phase of subsidy reform plan this summer

Business Materials 4 February 2014 14:52

Baku, Azerbaijan, Feb. 4
By Rahim Zamanov - Trend:

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 (to start March 21), Iran's IRNA News Agency reported on February 4.

Of the 219 votes cast, 119 MPs voted for the plan, 79 voted against and seven abstained.

Vice President for Executive Affairs Mohammad Shariatmadari will be in charge of carrying out the second phase of the subsidy reform plan.

The Iranian Mehr News Agency reported on January 28 that the Iranian administration has once again asked rich families to voluntarily give up receiving cash subsidies.

Mohsen Bahrami Arzi, an advisor to the vice president for executive affairs, said on January 28 that 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.

"In a symbolic move, Iranian President Hassan Rouhani has voluntarily given up receiving cash subsidy," he added.

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 kind of breach of their privacy.

"There are two substitute methods. The first is that affluent families give up receiving the subsidies voluntarily. And the second is that the administration creates more jobs for people," Nahavandian said.

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

The three groups of Iranian families with the highest incomes include over 22 million people.

Iran's Central Bank Governor Valiollah Seif has said that people have well understood the need (to cut cash subsidies for affluent groups), and the society is prepared for doing the job.

Meanwhile, the Majlis approved a bill on November 3 that allows the administration to pay cash subsidies as much as the past at least by the end of the current Iranian calendar year (March 20, 2014).

The subsidy reform plan pays 455,000 rials (about $18 based on the U.S. dollar official exchange rate of 24,800 rials) to Iranians, eliminating subsidies for fuels and some commodities.

Head of Parliamentary Economic Committee Gholamreza Mesbahi Moqaddam has said the subsidy reform plan put into place by the administration of former president Mahmoud Ahmadinejad has created $13 billion more in liquidity than was anticipated.

MP Ahmad Tavakkoli has criticized the current method of cash subsidy payments, saying that paying subsidies in cash to people is carried out just in Iran. Paying cash subsidies to all groups of people with different incomes should be revised given that the administration is facing budget deficit.