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Iran to pay cash subsidies

Oil&Gas Materials 17 February 2011 17:42 (UTC +04:00)

Azerbaijan , Baku, Feb. 17 / Trend, A.Yusifzade /

The second stage of cash subsidies in Iran will be paid shortly, Mehr News Agency reported quoting Iranian Subsidy Policy Reform Chairman Behrouz Moradi as saying.

According to Moradi every Iranian family member will receive 890,000 rials (some $86) from Iranian month of Esfand (starting Feb.20, 2011).

Economic reform plans that Iranian government began implementing from Dec.19, 2010 aimed at overhauling the country's economy by shelving energy and food subsidies.

Before the official announcement of the reform plans, every Iranian family member received a sum of 810,000 rials ($80) for two months.

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 can 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.

Under a subsidy reform plan adopted by Parliament in January 2010, Iran plans to eliminate the subsidies on fuel, energy and certain goods over five years. But to make up for any financial hardship suffered by the less well-off families, they will receive direct cash payments to their bank accounts.

Energy subsidies have cost Iran $100 billion a year.

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