Current subsidies plan causes inflation, damages underprivileged population

Business Materials 27 May 2015 16:43 (UTC +04:00)

Tehran, Iran, May 27

By Mehdi Sepahvand - Trend:

This week the Iranian government increased energy prices.

The Iranian government lifted a semi-subsidized monthly gasoline ration of 60 liters for cars that used to be sold at 7000 rials (about $2.5, for each 28500 rials making one USD) per liter. It increased prices of other energy carriers as well.

This comes as part of a plan to reform subsidies that the government pays on energy carriers.

But instead of helping the underprivileged population, the plan causes further inflation and pressurizes the underprivileged, Seyyed Nasser Mousavi Largani, deputy chairman of the Economic Committee of Iran's Parliament told trend May 27.

In the beginning, the subsidies were designed to help the underprivileged by being paid to them in monthly installments in the course of five years. But each year, 20 percent of the original sum was to be lifted until it reached zero, Largani said.

Iran is facing a financial resources deficit to pay cash subsidies within the framework of the subsidy reform plan. Experts say the administration should deal with the situation through either removing wealthy people of the list of subsidy receivers or increase fuel prices.

Largani expressed regret that the subsidies reform plan has not been implemented as it should have been. He noted that the economic team of former president Mahmoud Ahmadinejad then decided that the government should take money from 30 percent of the population which uses 70 percent of the country's energy resources and give the money to the other 70 percent which uses only 30 percent of the country's energy resources.

That plan, however, was not implemented; and we saw even Iranian nationals who lived abroad receive the cash subsidies, much different than the originally intended outcome, the MP noted.

Edited by CN

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