Underprivileged Provinces Have Lion's Share of New Cash Subsidies

EghtesadOnline: Underprivileged provinces will receive bigger shares from the government’s fresh cash subsidy as compensation for the recent hike in gasoline prices, known as the Livelihood Assistance Program.

News ID: ۷۴۹۰۲۸

27 November 2019

According to Hossein Mirzaie, the spokesperson of the headquarters associated with identifying eligible applicants for the new aid program, 82.1% of the households in the southeastern province of Sistan-Baluchestan are entitled to receive cash payments, the highest portion among Iranian provinces, followed by 79.2% of households in North Khorasan, 78.4% in South Khorasan, 78% in Golestan and 77.7% of households in Lorestan, Mehr News Agency reported.

Tehran Province has the smallest number of households eligible for the new aid program with 57.2% of the total number of its resident households, followed by Alborz (63.6%), Yazd (64.9%), Isfahan (65.9%) and Bushehr (66.8%), Financial Tribune quoted him as saying.

This financial assistance will only be provided to seven income deciles, including 18 million households or 60 million individuals, and those who fall into the top three income deciles (high-earners) won’t receive the handout.

Since the government got the ball rolling on gasoline price reform on Nov. 15, based on which fuel was rationed and prices rose by at least 50%, officials have promised distribute revenues earned from reforming gasoline prices, in their entirety, to people in need (Oil Minister Bijan Namdar Zanganeh), and that not a single rial gained from raising gas price would go to the government’s coffers (Ali Rabiei, the government spokesman) and that all takings from gas price hike will be granted to 60 million people (Mohammad Baqer Nobakht, the head of Plan and Budget Organization).

Zanganeh said the latest rationing and increase in the price of gasoline, 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.

Daily consumption now is around 95 million liters and is projected to rise to 100 million liters in the next fiscal year, of which 67% or 24.5 billion liters will be sold at 15,000 rials (12 cents) per liter and the rest (12 billion liters) at 30,000 rials (25 cents) per liter, he added.

Zanganeh said the government will earn $1 billion more by selling subsidized fuel and close to $1.5 billion from selling non-subsidized gasoline, adding that the excess supply will be offered on the energy bourse.

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

The three-phase execution of the aid program, according to a report by Persian-language daily Iran, started on November 19. The government made two cash payments to 40 million Iranians on that day and Nov. 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 receive the new aid, the government announced that 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 state grant.

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.

It’s almost a decade that Iranian governments are making cash payments directly to people. The Targeted Subsidies Law of 2010 authorized the reduction of subsidies on food and energy and the payment of 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 of cash subsidies.

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