Imports of Essential Goods Hit Record With 6.2m Tons

EghtesadOnline: The Government Trading Corporation has imported a record high of 6.2 million tons of essential goods since the beginning of the current Iranian year (started March 21), the director general of GTC’s Foreign Trade Coordination Department said.

News ID: ۷۸۷۴۵۶

20 December 2021

“The essential goods were imported through Iran’s southern and northern ports through 294 vessels, which also mark a record,” Masoud Raygan was also quoted as saying by IRNA.

He added that the import volume is expected to reach 10 million tons by the Iranian yearend (March 20, 2022).

Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.

“We imported more than 4.22 million tons of wheat, 1.01 million tons of unrefined [edible] oil, 684,000 tons of unrefined sugar and 252,000 tons of rice during the period. These shipments have already been unloaded at our ports of entry and are currently either stored in warehouses or have been distributed to the market across the country’s 31 provinces,” he added.

The official noted that Imam Khomeini Port in Khuzestan Province accounts for 42% of the essential imports, Shahid Rajaee Port in Hormozgan Province 32%, Chabahar in Sistan-Baluchestan Province 14%, Amirabad and Nowshahr ports both in Mazandaran Province 6% each and Bushehr Port in the southern Bushehr Province 1%.

“Amirabad and Nowshahr ports each hosted 91 vessels, Imam Khomeini 49, Shahid Rajaee 43, Chabahar 16 and Bushehr 4,” he said.

GTC, affiliated with the Agriculture Ministry, is the lever for enforcing market controls and in charge of maintaining the supply of wheat, rice, cooking oil, sugar and meat for the country’s strategic reserve of essential goods.

Essential goods are imported at a subsidized forex rate: wheat, corn, barley, unrefined and edible vegetable oils and oilseeds at the rate of 42,000 rials per dollar while rice and sugar are entitled to lesser subsidy closer to market rates (around 300,000 rials per dollar).

However, in the fiscal 2022-23 budget bill, the government has proposed that the subsidized regime be abolished in the next fiscal year (starting March 21, 2022).

The measure, which must first be approved by the parliament before it is passed into law, should put a permanent end to the years-long debate on rescinding the costly and corruption-tainted subsidy policy.

The government says it has allocated 1,000 trillion rials ($3.3 billion) to help compensate the elimination of subsidized foreign currency in the 2022-23 budget.

As per the budget bill recently submitted to parliament by President Ebrahim Raisi, the government will pay the $3.3 billion “to offset price rises of basic goods, pharmaceuticals, bread and guaranteed-purchase of wheat”, local media reported.

Since mid-2018, the government has subsidized currency for importing essential goods ($1=42,000 rials). The highly subsidized rate is less than a seventh of the real prices in the open forex market and provided fertile ground for rent-seeking by some big import companies, vested interests and state cronies.

The subsidized forex is supplied by oil export revenues for importing essential goods, pharmaceuticals and machinery to avoid price hikes.

While successive Iranian governments have subsidized food imports, cheap currency in its current format was first given after the steep rise in foreign exchange rates in the spring of 2018 soon after the United States abandoned the Iran nuclear deal and imposed tough economic sanctions.

Flaws in the apparently ill-advised policy emerged in the first few months of its inception and the government under pressure was compelled to slash the list of goods eligible for subsidized currency.

In the present fiscal budget, the government was not allowed to pay more than $8 billion in subsidized currency for importing food and medicine. The Central Bank of Iran says what has indeed been paid so far is over and above the ceiling set in the budget.

The $3.4 billion will likely be channeled to the low-income strata in the form of cash subsidy.

Prominent economists, academia and socioeconomic experts maintain that the forex subsidy policy never achieved its goal of supporting the downtrodden, as greedy middlemen and cronies in the distribution chain benefited the most.

On many occasions, consumers of imported essential goods must buy their needs at prices closer to open market forex rates, thanks to the gross mismanagement, inefficient distribution system and absence of viable government oversight.

In short, a significant portion of the cheap forex is pocketed by big importers and the distribution chain instead of end customers, which ostensibly means the millions of Iranians at the lower-end of the economic ladder.

It is often heard in Tehran’s politico-economic circles that in the past three years, billions in subsidized currency were given to selected companies to import food and medicine, though some of these companies did not import anything.

It later turned out that some of the firms who took the scarce forex resources were shell companies. Few, if any, have paid for the thefts or faced the full force of the law.