Bi-Honar
05-13-2010, 06:17 PM
By Ali Sheikholeslami
Bloomberg
May 13 (Bloomberg) -- The Iranian government will start to slash subsidies for fuel and basic goods in September and replace them with targeted grants for the poor, President Mahmoud Ahmadinejad said. “Savings on resources, increasing creativity and innovation, and a fair distribution of resources are the most significant parts of this plan,” Ahmadinejad said in southwestern city of Yasouj, state television reported today on its website. The start of the cuts will coincide with the beginning of the second half of the Iranian year on Sept. 23, Ahmadinejad said [very interesting to pick Mehregan as the starting date for sticking it to people - expect the name to change to Zolmegan going forward ;)]. The measures are in a law passed by parliament in January.
Subsidies have been a tenet of the Islamic regime since its establishment in 1979 and accounted for 27 percent of Iran’s economy in 2007. Lawmakers and analysts have warned that cutting the subsidies and allowing consumer prices to rise is politically risky. “The plan may result in the reverse of what Ahmadinejad is trying to achieve because of the inflation hike it will bring,” Fereydoun Khavand, professor of economics at Rene Descartes University in Paris, said in a telephone interview. “By handing out cash subsidies, he is trying to gain popularity with the poorer population.”
The legislation is intended to produce in savings in the first year totaling $20 billion, money that would be used to make payments to the poor, improve the welfare system, and increase fuel efficiency [read this as the additional $20 billion is needed to pay for Basiji mozdoors and IRGC's dog and pony defence shows to kee the security situation under control]
Gasoline sells for 10 U.S. cents per liter (0.26 gallon) in Iran’s domestic market. The end of subsidies means Iranian consumers will eventually pay 90 percent of the delivered price of gasoline, gasoil, liquefied gas and other oil products, according to the legislation. Prices of water and electricity will be allowed to reach the level of actual costs, while wheat, rice, milk, sugar, postal services, and air and rail transportation will undergo gradual price adjustments. Iran’s official budget deficit stands at 1.4 percent of the gross domestic product, according to the International Monetary Fund. Analysts say the figure is higher and may be as much as 10 percent of GDP.
[I just read a few days ago that the subsidy cuts will kick-in before the end of May. I'm not sure if there was a major backlash to this announcement and they changed the date, or there's other reasons for it]
Bloomberg
May 13 (Bloomberg) -- The Iranian government will start to slash subsidies for fuel and basic goods in September and replace them with targeted grants for the poor, President Mahmoud Ahmadinejad said. “Savings on resources, increasing creativity and innovation, and a fair distribution of resources are the most significant parts of this plan,” Ahmadinejad said in southwestern city of Yasouj, state television reported today on its website. The start of the cuts will coincide with the beginning of the second half of the Iranian year on Sept. 23, Ahmadinejad said [very interesting to pick Mehregan as the starting date for sticking it to people - expect the name to change to Zolmegan going forward ;)]. The measures are in a law passed by parliament in January.
Subsidies have been a tenet of the Islamic regime since its establishment in 1979 and accounted for 27 percent of Iran’s economy in 2007. Lawmakers and analysts have warned that cutting the subsidies and allowing consumer prices to rise is politically risky. “The plan may result in the reverse of what Ahmadinejad is trying to achieve because of the inflation hike it will bring,” Fereydoun Khavand, professor of economics at Rene Descartes University in Paris, said in a telephone interview. “By handing out cash subsidies, he is trying to gain popularity with the poorer population.”
The legislation is intended to produce in savings in the first year totaling $20 billion, money that would be used to make payments to the poor, improve the welfare system, and increase fuel efficiency [read this as the additional $20 billion is needed to pay for Basiji mozdoors and IRGC's dog and pony defence shows to kee the security situation under control]
Gasoline sells for 10 U.S. cents per liter (0.26 gallon) in Iran’s domestic market. The end of subsidies means Iranian consumers will eventually pay 90 percent of the delivered price of gasoline, gasoil, liquefied gas and other oil products, according to the legislation. Prices of water and electricity will be allowed to reach the level of actual costs, while wheat, rice, milk, sugar, postal services, and air and rail transportation will undergo gradual price adjustments. Iran’s official budget deficit stands at 1.4 percent of the gross domestic product, according to the International Monetary Fund. Analysts say the figure is higher and may be as much as 10 percent of GDP.
[I just read a few days ago that the subsidy cuts will kick-in before the end of May. I'm not sure if there was a major backlash to this announcement and they changed the date, or there's other reasons for it]