No Tripling of Cash Subsidies

EghtesadOnline: To raise cash subsidy payments to 2.5 million rials (about $66) per head, the prices of energy carriers need to rise sixfold.

News ID: ۷۴۱۳۴۱

06 May 2017

That’s what Government Spokesman Mohammad Baqer Nobakht told his weekly press conference on Tuesday in reference to campaign promises made by two presidential candidates, namely Ebrahim Raeisi and Mohammad Baqer Qalibaf, the Persian daily Etemaad quoted Nobakht as saying.

The government’s monthly payment of cash subsidies to the have-nots covered by State Welfare Organization and Imam Khomeini Relief Committee rose from an average of 710,000 rials ($19) to 2.4 million rials ($64) in the Iranian month of Farvardin (March 21-April 20).

What they receive now is on top of the 450,000 rials paid in direct subsidy to more than 90% of all Iranians, said Nobakht who is also the head of Planning and Budget Organization.

“The question I have for the presidential candidates is that whether their promised 2.5 million-rial cash subsidy is all-inclusive or just for those covered by the national relief organizations?”, Financial Tribune quoted him as saying.

A Supreme Audit Court of Iran’s study shows doubling or tripling universal cash subsidies is only possible by increasing the prices of energy carriers.

“Total revenues earned from selling gasoline, diesel, kerosene and fuel equal 368 trillion rials ($9.81 billion) a year. National Iranian Gas Company revenues hover around 154 trillion rials ($4.1 billion) and electricity sales stand at 167 trillion rials ($4.45 billion) annually, not to mention that Iran Grid Management Company is exempt from paying the Organization of Targeted  Subsidies because it already sells subsidized electricity to subscribers. All in all, gross revenues earned from selling energy carriers total 690 trillion rials ($18.4 billion),” he said.

Noting that the National Iranian Oil Refining and Distribution cannot distribute whatever it has sold among people, Nobakht said the company has to deduct taxes, including value added tax and municipal duties (amounting to $1.86 billion), spend 5% of the its revenues on renovation of pipes and the likes of pollution taxes.

“What remains plus the share of the National Iranian Gas Company account for the total revenues of the Organization of Targeted Subsidies that stands at 364 trillion rials ($9.7 billion),” he said.

“This comes as during the past Iranian year (March 2016-17), the government paid 410 trillion rials ($10.9 billion) in direct cash subsidies to the Iranians, 4.8 trillion rials ($128 million) in food aid and 5 trillion rials ($133.3 million) in a health program.”

The spokesman said the government was forced to borrow from the treasury to fund the deficit between the revenues ($9.7 billion) and cash subsidies ($11.2 billion) last year.

In fact, the money that should have been spent on public services and development of roads was given to the people as subsidies.

“I have no doubt about the integrity of these candidates but their statements are thought-provoking. I hope what candidates mean by increasing cash subsidies just include a promise on the handouts received by the less-privileged. In this case, the current government has already raised the direct subsidies of citizens covered by State Welfare Organization and Imam Khomeini Relief Committee by three times,” he concluded.

On Monday, Parliament Speaker Ali Larijani slammed campaign promises made by the two candidates, saying that given the country’s current state of economy, the governments won’t be able to multiply cash payments.

“Where do the candidates want to find resources to fulfill their promises?” he asked.

Those who make such promises, Larijani said, should bear in mind that decision-making about payment of direct subsidies is not under the authority of the government, stressing that the parliament devises the subsidy policies.

As part of the Subsidy Reform Plan, the Ahmadinejad administration removed subsidies on food and energy in 2010 and instead paid 455,000 rials ($12) to all Iranians on a monthly basis.

The administration of President Hassan Rouhani has retained the plan, albeit reluctantly. After all, an overnight cancellation of the scheme, as many experts have argued, could translate into political suicide as the recipients, mostly ordinary citizens from low income population, have grown accustomed to the monthly stipend over the years.

Nonetheless, the incumbent government has moved to restrict the number of cash subsidy recipients, slowly but steadily.

According to Nobakht, 4,853,386 people have been removed from the list of cash subsidy recipients as of January 20.