Motorists Should Pay Surcharge at the Pumps

EghtesadOnline: As per law, vehicle owners should be charged an extra amount at pumps for filling up their tanks, head of Iran Gas Station Owners Union said.

News ID: ۷۴۸۴۲۰

14 September 2019

"According to the $37.6 billion budget for the current fiscal year (March 2019-20), motorists should be pay a  surcharge when filling up," Vali Atapour was quoted as saying by ILNA Wednesday.

"Talks are underway with the government and we expect that the law to be implemented later this month [if officials are convinced].”

Asked about the extra amount, he said the law says it should be between 10 to 20% of the purchased fuel price depending on the location of the station [the more far-flung the gas station is, the more should be the extra charge]. The union reportedly is of the opinion that the fee should be at least 30% [of the purchased fuel price], according to Financial Tribune.

In recent months, with reintroduction of the smart fuel card to buy fuel, there has been talk about rationing fuel and raising pump prices. But the Majlis seemingly is against rationing gasoline and does not want the government to increase fuel prices.

"We don’t know for sure whether or not car owners would be willing to pay the fee," Atapour wondered.

There are 3,600 plus gas stations in Iran, of which 191, or roughly 5%, are owned and operated by the staste and government, he said, adding without elaboration that state-owned gas stations should be handed over to private companies.

Advocates of free enterprise have called for opening the fuel market to private investors who would obviously do better by offering better services and premium gasoline. But it could take years before Iran’s state-dominated fuel market is reformed and restructured.

Atapour said privatization of gas stations will help the National Iranian Oil Products Distribution Company, a subsidiary of the Oil Ministry, to gradually scale down its operational role and pay more attention to supervision in the supply and sale of gasoline and other fuels.

A shortage of gas stations, particularly in most big cities, creates long queues of cars on a daily basis. According to reports, there is one gas station for every 7,500 people in the UK and one for every 2,600 people in the US. According to the NIOPDC data, in Iran there is one gas station for 22,000 people. There are at least 25 million cars in Iran.

The first phase of using fuel cards at filling stations commenced on August 13 in four mega cities, namely Tehran, Karaj, Isfahan and Tabriz.

Breeding Corruption

Energy experts including Hamidreza Salehi, head of the Energy Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture, say the initiative to resume use of the smart fuel cards will help fight smuggling if fuel is sold at higher prices.

"Rationing fuel and selling it at two different prices is a recipe for disaster and will breed corruption," he said, and recommended that a gradual price hike on an annual basis would have helped fight smuggling effectively.

"Had prices increased gradually in the past few years, discrepancy in prices in Iran (7 cents/liter) and most neighboring countries (75 cents) would not be as high as it is now," he said, adding that close to 7 million liters of gasoline are smuggled to neighboring countries every day.

Salehi said subsidizing fuel was, is, and will be a wrong policy as subsidy is primarily given to car owners.

Gasoline rationing started in 2007. At that time motorists could buy 60 liters of subsidized fuel each month with a special card at 7,000 rials (70 cents) per liter (at the time a dollar was worth 10,000 rials).

The average price of gasoline around the world is $1 per liter, whereas it is sold at 9 cents a liter in Iran [as cheap as Cuba]. The fuel is sold at 84 cents, $1.4, $1.5 and $1.18 in Lebanon, India, China and Turkey respectively.