IRAN’S CONSERVATIVE parliament yesterday gave the go-ahead for the government to introduce steep cuts in energy and food subsidies.
The move to slash subsidies, which cost about $100 billion (€67.5 billion) a year, is a political gamble for the administration of President Mahmoud Ahmadinejad.
But economists welcomed the decision, saying no Iranian government could afford to maintain them at current levels. The subsidies cover oil, petrol, natural gas, electricity, water, bread, transport and telephone services.
“Under the current circumstances about a third of the country’s income is directly or indirectly paid in subsidies,” Shamsoddin Hosseini, economy minister, told parliament.
“We are not going to completely eliminate subsidies but will make them targeted and distribute them fairly.” Some politicians and economists were concerned by Mr Ahmadinejad’s record of introducing measures hastily without adequately preparing the ground. A petrol rationing scheme imposed two years ago sparked protests in which at least a dozen petrol stations were set alight.
In a sign of the regime’s nervousness about cutting subsidies, in particular after the disputed presidential election in June that led to deaths and hundreds of arrests, there were reports that parliament might discuss details of the scheme in a closed session.
Opponents of the reform warned yesterday that it would lead to an increase of at least 20 per cent in inflation and to the bankruptcy of many industries heavily dependent on cheap energy.– (Copyright The Financial Times Limited 2009)