Cash subsidies harm Iran’s oil industry
Baku, Azerbaijan, Dec. 29
By Fatih Karimov- Trend:
Paying cash subsidies has forced Iran's oil ministry to halt new investment in the country's oil and gas sector, Mansour Moazami, the oil minister's advisor said.
The policy of paying cash subsidies not only failed to make balance in country's economy, but also drained the budget of oil and energy ministries, Moazami said, Iran's Mehr news agency reported Dec. 29.
He further said that the subsidy reform plan failed to improve the Gini coefficient in the country and boost the production.
The Gini coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation's residents, and is the most commonly used measure of inequality.
Iran's subsidy reform plan is aimed at easing pressure on state finances by cutting tens of billions of dollars from government subsidies on food and fuel. The government pays cash to citizens as compensation for increased prices by cutting subsides.
The administration of former president Mahmoud Ahmadinejad implemented the first stage of the subsidy reform plan toward the end of 2010.
Earlier Mansour Moazami said that whereas according to the 5th National Development Plan the annual investment in oil projects was going to be $50 billion, the investment through the past four years has gone barely beyond that amount [$50 billion].
Moazami further touched upon the Islamic Republic's plan for increasing the oil output once sanctions are removed, saying Iran would increase its oil production by 500,000 barrels per day immediately.
Iran expects international sanctions to be lifted in the first months of coming year, as it is adhering to the terms of a July nuclear deal clinched between Tehran and the world's six major powers.
The Islamic Republic is able to increase its oil output by one million within six months after sanctions' removal, Moazami said.
He also rejected media reports that Iran's oil output increase would lead to instability in the oil market, saying the OPEC members who overloaded the market with 1.8 million barrels of oil per day are responsible for the price decline.