NIOC Ordered to Supply 1m Tons of Free Bitumen

EghtesadOnline: The Majlis has obliged the National Iranian Oil Company, to supply one million tons of free bitumen to executive organizations for construction projects in the current fiscal year (ends next March).

News ID: ۷۵۰۶۸۵

12 August 2020

Lawmakers made the decision at the weekend regarding delivery of free bitumen by NIOC, affiliated to the Oil Ministry, to executive bodies for urban and rural road asphalt, Mehr News Agency reported.

Bitumen will be delivered to the Ministry of Roads and Urban Development, Ministry of Interior, Ministry of Education, and Ministry of Agriculture Jihad for the construction of roads in villages and small cities plus open areas of schools and mosques.

The government is obliged to provide the NIOC with the required funds estimated to be around $200 million.

Providing free tar to contractors is seen as an incentive to carry out costly construction and reconstruction projects and help develop urban and rural areas.

The rare decision was taken as many road building projects are on hold waiting for free asphalt from the government. Most of the tar, especially high grade, produced inside the country is exported.

Reports say Iran needs 4 million tons of asphalt a year for domestic use. It produced 5.5 million tons last year, of which 4 million was exported to Asian and African companies including India, Turkey and Georgia.

Over 100 million tons of tar is produced annually in the world. Iran used to contribute 10% to the world market in the past. However, its share has dropped due to problems arising from US economic sanctions and export issues.

The US reimposed tough economic sanctions in 2018 targeting the oil, banking, energy and industrial sectors.

In the past, the government offered subsidized bitumen to the relevant bodies, including municipalities.

The Majlis move to ask the government to offer free bitumen instead of subsidies is due to two reasons. First is its high pricein the market. Second, in many cases in the past the government has not paid the subsidies as agreed.

Opponents of the new Majlis plan say it can push the key industry into corruption.

In 2017 and 2018, four million tons of free bitumen were given to contractors, but it eventually appeared in the open market instead of being used for national construction projects.

The entire state policy of subsidizing goods and services is strongly rejected by free market advocates largely on the premise that it is a breeding ground for embezzlement, corruption and fraud.

To prevent this happening again, the MPs have said that any form of sale or use of free bitumen by the contractors outside the official sphere is prohibited. Executive bodies are obliged to prepare full reports on how, where and when the bitumen is used.