Medicinal Subsidies Curtailed

EghtesadOnline: All supplements, over-the-counter drugs, licensed medicines and imported granules that have local counterparts as well as inactive ingredients added during the pharmaceutical manufacturing process have been removed from the list of subsidized imports.

News ID: ۷۵۰۱۵۸

02 June 2020

However, importers are allowed to procure their foreign currency requirements from the export earnings of non-oil products (petrochemicals, steel and minerals) traded through the so-called secondary FX market, known by its Persian acronym Nima.

The announcement has been made by Gholamhossein Mehralian, a Health Ministry official, in a letter to Mehdi Soleimanjahi, secretary of Iranian Pharmaceutical Industries Syndicate, Fars News Agency reported.

Following the re-tanking of the national currency in early 2017, the government introduced stringent rules like banning the import of non-essential goods, especially those produced inside the country (known as Group IV goods). It allocated subsidized currency at the rate of 42,000 rials to a dollar to 25 categories of goods (known as Group I or essential goods) to help protect consumers against galloping inflation, rampant price gouging and hoarding, not to mention the high and rising cost of living.

Two other categories of imports were also defined: Group II, which mostly included raw materials, intermediate and capital goods, and Group III consisting of essential consumer goods.

Importers of products in Group II were to meet their forex requirements from the secondary forex market. Importers of goods in Group III could buy hard currency from exporters who were not required to offer their forex earnings on Nima.

In the last fiscal year (March 2019-20), the government removed five items, namely red meat, butter, pulses, tea and sugar, from the list of basic goods entitled to subsidized currency. Since the beginning of the current year (March 20), rice has also been taken off from the list of subsidized imports.

Vegetable oil, oilseeds, corn, barley, soybean meal, raw materials for manufacturing tires, heavy-duty vehicle tires, paper pulp and different types of paper are still considered essential goods.

*** Coronavirus Deals Blow to Importers

Shipping of pharmaceuticals has now turned into a major concern for importers, as transportation of such critical products are mostly carried out by air, Nasser Riahi, a senior member of Tehran Chamber of Commerce, Industries, Mines and Agriculture, said in March.

Riahi noted that the transport of final drug products is one of the most difficult tasks in the pharmaceutical supply chain because of the sensitive nature of the product and the complexity of logistics network.

“At present, virtually no flight is being operated from Europe to Iran [following the outbreak of the new coronavirus]. Road transportation of drugs is not recommended because they must be kept at different temperatures and conditions. Pharmaceutical freights are typically small in weight and size; they can't be transported by a truck. Besides, truck drivers are also grappling with lots of problems in crossing neighboring borders,” he was quoted as saying by ILNA.

“Drug companies have asked one foreign supplier to reserve a regular charter flight to carry the products of all importers once or twice a week. But the cargo must weigh at least 8-10 tons.”

Asked about Switzerland’s financial channel, known as the Swiss Humanitarian Trade Agreement, Riahi said, “So far, only one transaction has been carried out via this channel using the remaining resources of the Central Bank of Iran with Swiss bank, BCP. More transactions depend on CBI’s allocation of foreign currency. The key problem with the mechanism of SHTA is that BCP only works with Swiss firms and avoids opening accounts even for other European companies that are Iran’s partners.”

Noting that the country’s medicine reserves were sufficient before the outbreak of coronavirus as well as 2020 New Year holidays, Riahi said, “Over the past couple of months, only 30% of the foreign currency needed for imports of pharmaceuticals have been earmarked. Apparently, the Health Ministry’s ration of foreign currency for the current fiscal year [March 2019-20] has ended.”

*** Humanitarian Trade Channel

In late February, the United States and Switzerland formally launched a humanitarian trade channel to allow companies to trade food, medicine and other critical supplies with Iran.

Reuters said the US Treasury Department announced that SHTA was fully operational and noted that it was the first channel established under a US framework announced in October 2019 to facilitate humanitarian trade with Iran.

The channel started pilot operation after a shipment consisting of medicine valued at approximately €2.3 million was sent to Iran.

SHTA seeks to ensure that Swiss-based exporters and trading companies in the food, pharmaceutical and medical sectors have a secure payment channel with a Swiss bank, through which payments for their exports to Iran are guaranteed.

Food, medicine and other humanitarian supplies are exempt from the sanctions that Washington reimposed on Tehran after US President Donald Trump walked away from the2015 international deal over Iran’s nuclear program. But the US measures targeting everything from oil sales to shipping and financial activities have deterred several foreign banks from doing business with Iran, including humanitarian deals.

Last week, however, Sharif Nezam-Mafi, the head of Iran-Switzerland Chamber of Commerce, said, “The CBI will decide about using the payment channel devised by the Swiss government for sending humanitarian goods to Iran. Using the channel carries some costs for the central bank, as it should allocate resources to the channel to the extent possible."