Iran Gov’t Paying New Subsidies After Gasoline Price Hike

EghtesadOnline: Since the government got the ball rolling on gasoline price reform on Nov. 15, by rationing and raising the price of fuel by at least 50%, officials such as Oil Minister Bijan Namdar Zanganeh have declared that revenues earned from the new fuel price hike, in their entirety, would be redistributed among the people.

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25 November 2019

Ali Rabiei, the government spokesman, also stressed that not a single rial gained from raising gas price would go to the government’s coffers, while Mohammad Baqer Nobakht, the head of Plan and Budget Organization, said all the revenues earned from the price hike will be granted to 60 million people (from a total population of 82 million).

“The latest rationing and hike in gasoline price, according to which, private car owners can buy 60 liters of subsidized gasoline every month with a fuel card for 15,000 rials [12 cents] per liter, up 50% [in prices] and additional purchases [maximum 250 liters a month] will cost 30,000 rials [25 cents] per liter, up 200%, will increase annual government revenues by $2.5 billion, which will be used exclusively for welfare spending,” Financial Tribune quoted Zanganeh as saying.

“Presently around 95 million liters, daily gasoline consumption is projected to rise to 100 million liters in the next fiscal year … The government will earn $1 billion more by selling subsidized fuel and close to $1.5 billion from selling non-subsidized gasoline. The excess will be offered on the energy bourse.”

Prior to the price hike (when gasoline was sold at 7 cents per liter), the government’s annual earnings from selling gasoline amounted to $31.7 billion, which will now reach $34.2 billion or 8% higher.

The three-phase execution of the aid program, according to a report by the Persian-language daily Iran, started on Nov. 19. The government made two cash payments to 40 million Iranians on that day and November 21, and wrapped up the first round of the financial assistance program on Nov. 23 by paying cash subsidies to the remaining eligible receivers.

To clear the air over which economic segments of Iranian society will be entitled to the so-called “Livelihoods Assistance Program”, the government announced villagers and nomads, pensioners, those supported by the Imam Khomeini Relief Foundation and State Welfare Organization, workers, teachers, civil servants, female breadwinners and low-income individuals will be entitled to the new fuel subsidy payment.

Cash aid will be 550,000 rials ($4.6) for one-person households, 1.03 million rials ($8.6) for two-person families, 1.38 million rials ($11) for three-person households, 1.72 million rials ($14.5) for four-person households and 2.05 million rials ($17.2) for households with five or more persons.

As of Nov. 24, heads of households who were left out of the program can apply by dialing *6369# to place a complaint and have their cash aid flowing. The criteria for identification by the Ministry of Cooperatives, Labor and Social Welfare include household assets, their level of income and expenditure.

“This financial assistance will only be provided to seven income deciles; those who fall into the top three income deciles (high-earners) won’t receive a handout, the spokesperson of the headquarters associated with identifying eligible applicants for the Livelihood Assistance Program,” Hossein Mirzaie told Tasnim News Agency.

According to Hamid-Reza Adl, an official with the Plan and Budget Organization, a separate section has been envisioned in the government’s budget proposal for the next fiscal year (March 2020-21) for this new aid program.

It’s almost a decade that Iranian governments are extending cash subsidies directly to people. The Targeted Subsidies Law of 2010 authorized the reduction of subsidies on food and energy, and started paying 455,000 rials ($3.8) to each and every Iranian on a monthly basis. The plan has been retained so far and nearly 76 million or 95.21% of Iranians currently receive the monthly grant.

Recently, the government discontinued monthly payments of cash subsidies to a further 400,000 individuals who were found to be economically well off. In doing so, the number of those removed from the list of cash subsidy recipients over the past two months hit 1.1 million, Mehr News Agency reported.