Iran’s power shortage can be eliminated by applying market prices

Oil&Gas Materials 3 February 2009 17:07 (UTC +04:00)

Azerbaijan, Baku, Feb. 3 / Trend , T.Jafarov/

To eliminate the deficit of electricity in Iran, the cost of energy should not be subsidized by the state budget, as calculated in accordance with the market principles that lead to involvement in this sector of the economy, private capital, Iranian expert for economic affairs and a professor at the Rene Dekart University Freydun Havand said to Trend .

"If the Iranian government would buy electricity from private companies at market price and sell it to the public at subsidized cost, it can increase the interest of private sector in this field," said Havand

In 2009, Iran's electricity demand will be 41,000 MW, but the country is capable of producing up to 37,000 MW. There is shortage of four thousand megawatts of electricity In the country, said earlier Iranian director of the electricity company Tavanir Mahammad Behzad in Tehran.

Although one of the main reasons for the shortage of electricity in Iran is the dryness, among other factors is lack of financial resources and investment in this sector.

According to experts, the fact that energy is paid for by grants from the state budget, private companies are unprofitable to invest in this sector. "If the private sector to make investments in this area, it will be forced to sell electricity at a cost of subsidies allocated to the state, and that is unprofitable," said Havand on Monday by telephone from Paris.

Despite the fact that in recent year, Iran makes efforts to ensure that the private sector to invest in the production of electricity, the process did not yield fruits.

Four years ago in order to increase the production of electricity the Islamic Republic would carry out a 10-year development program. According to the program, Iran had to build a power plant with capacity 30 thousand MW in ten years period. The project with the help of the private sector for the construction of new power plants, but the lack of financial sources, mechanism of sale of electricity from plants that are not spent for the electricity sold to the market price, resulting in a lack of interest in the private sector investments.

The policy of the Iranian government in energy prices is unclear, and the private sector has no confidence in the future pricing policy of the state, former chairman of the Central Bank of Iran Bijan Bidabad said to Trend .  

A main reason for absence of investment in power engineering is an issue whether it will be possible to get income from the invested funds, he said. "The state can purchase electricity produced by the investors for a market price, interest on this field will increase," Bidabad said.

According to data of the Iranian Fars news agency, electricity price increased by 90 percent within last 40 years. In this period, prices in agriculture and industry increased by 100-200 times. One kilowatt-hour of power costs 107 rials for people in Iran, subsidy prices from public budget makes up 207 rials.

The Iranian parliament's representative Hasan Novruz said that if the government will function in line with the Article 44 of the Constitution (on privatization) and approves a project on economic changes, a power problem will be solved in the country.

Under the Article 44 of the Iranian Constitution, state, corporate and special property is protected only if they do not contradict Islamic principles and the constitution's other articles.

In accordance with this article and Iranian Supreme Religious Leader Ayatollah Khamenei, while fulfilling the Article 44, 80 percent of investment should fall on private sector and held by corporate operations.

"At present when Iran faces with power deficit at 4,000 megawatt, fulfilling the Article 44 will enable to remove this shortage," Parliamentary Energy Commission's Member Hasan Novruzi said.

If Iran pursues clear and transparent policy in energy pricing, a power problem can be solved, experts said.

The government and parliament is working over a joint project where the government will support private sector's investment initiative, Novruzi said.

"Iran will not have a power problem after launching Getven power station and Busher atomic power station," Novruzi told Trend from Tehran.

In 2004 Mohammad Hatami's government submitted a project to the parliament to increase power prices, but parliamentary members did not accept this document.

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