Fuel Cards Minus Rationing System Unjustified

EghtesadOnline: The program to restart use of fuel cards without restarting the 2015 gasoline rationing system would be pointless, the former head of the gasoline rationing office said.

News ID: ۷۴۷۴۳۱

26 May 2019

"Reactivating old fuel cards in and of itself cannot help curb the rampant fuel smuggling, nor can it create an incentive to reduce consumption," Abdolreza Amini was quoted as saying by ISNA.

A government plan to ration gasoline and increase prices was put on hold last month by the Majlis. However, the government says it wants to revive the fuel cards the use of which ended four years ago.

Obliging motorists to use fuel cards at the pumps without resuming the rationing system can only help data collection and that is why the plan should be revisited, Financial Tribune quoted Amini as saying.

"Restarting the use of fuel cards is costly as the old system must be updated. Moreover, maintaining the huge volume of data costs a lot. It is indeed illogical to pay huge amounts only to collect data."

There are about 4,000 filling stations in the country and upgrading all the pumps requires money.

The former official is of the opinion that the card system should not have been scrapped in the first place. Now that energy officials insist on reintroducing it, they also should ration fuel. If not, neither smuggling nor consumption can be controlled.

Lacking Oversight

Gasoline and diesel smuggling is not a new business in the porous border regions like Sistan-Baluchestan, observes and market pundits say, as there are no stringent controls in there.

Rejecting ideas and proposals that the rationing system could be used only in border regions, Amini said, "It is not fair to limit consumption only near the borders due to their geographical proximity and let people in other parts of the country use as much as they like."

Galloping inflation and the steep decline in the value of the rial over the past year further widened the gap between fuel prices in Iran and the neighboring countries. This has led to a big jump in smuggling of subsidized fuel (10-15 million liters per day) from the border areas to Pakistan and Afghanistan.

The discrepancy in prices in Iran (7 cents/liter) and most neighboring countries (75 cents) has made fuel smuggling a highly profitable and tempting trade.

The National Iranian Oil Products Distribution Company produces 105 million liters of gasoline per day.

According to NIOPDC, motorists bought 2.82 billion liters of gasoline in the first fiscal month that coincided with the Persian New Year holiday season. Last year same time 2.7 billion liters were sold.

The company says average daily gasoline consumption has increased from 87.1 million liters last year to 91.2 million liters now, thanks in part to the large numbers of gas-guzzlers, old engine technology and the inability and unwillingness of carmakers to improve quality to global standards.