Iranian MPs Differ Over Raising Fuel Prices

EghtesadOnline: Although the three branches of government (executive, legislative and judicial) have come to the conclusion that gasoline prices should increase, there is still no consensus among MPs about the sensitive subject, a lawmaker said.

News ID: ۷۴۷۹۸۰

27 July 2019

Jalal Mirzaei says part of the disagreement is because of the upcoming parliamentary election to be held in February 2020, IRNA reported.

The news agency said all “scenarios to increase fuel prices have so far failed” because under the current circumstances when people are under intense economic pressure, the Majlis is more inclined to pass bills that do not add to the mounting pressure… After all, they “need people's votes to get elected again.”

Parliament members including Mirzaei are almost certain about the inflationary effect of higher fuel prices. The executive branch’s insistence on higher prices notwithstanding, the Majlis has always refused to approve the proposal, Financial Tribune quoted him as saying.

"The closer we get to the election date (Friday 21 February 2020), the less likely we will achieve a consensus on the thorny issue," he noted.

Energy experts, including chairman of Majlis Economic Commission Mohammad Reza Pour-Ebrahimi, believe that fuel inflation will creep into inflationary expectations and have direct and indirect impact on people’s living costs.

“Inflationary expectations are more destructive than inflation itself. The government so far has only floated the idea of increasing gas and diesel prices and we already are witnessing price hikes for some goods and services,” Pour-Ebrahimi said.

Inflation expectation is the rate of inflation that workers, businesses and investors think will prevail in the future, which they will factor into their decision-making.

Separate Proposal

Mehrdad Lahouti, a MP from the northern city of Astaneh, told ILNA that the government does not need the parliament’s green light to raise energy prices. However, legislators have made suggestions like different and higher fuel prices in Tehran compared to other provinces to reduce air pollution and boost public transportation system.

As per a May 30 directive issued by the National Iranian Oil Products Distribution Company, car owners from August 11 will be able to buy fuel at the pumps only if they have a smart fuel card.

The directive says the plan, which was first implemented in 2007, has nothing to do with fuel rationing.

The government says reviving the program is related to plans to reduce consumption and minimize fuel smuggling in the border regions.

Illegal trade in fuel in and across the border regions, going on for decades, is said to be around 20 million liters per day worth $1.3 million.

Currently, a liter of gasoline is sold at 10,000 rials (7 cents).

The consumer inflation registered a year-on-year increase of 48% in the Iranian month Tir (June 22-July 22) compared with the similar month of last year, the Statistical Center of Iran reported.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 179.7 in the fourth month of the Iranian year, indicating a 2.8% rise compared with the previous month.