Iran’s energy prices unchanged for fiscal 2017

Financial Tribune- Prices of energy carriers in the next Iranian fiscal year (March 2017-18) will not increase, said Mohammad Mehdi Mofateh, spokesperson for the Majlis Planning and Budget Commission.  

Government revenues from implementing the Subsidy Reform Plan are forecast at approximately 48 trillion rials ($12 billion) for the next fiscal, the same as in the present fiscal, said the official, the Oil Ministry’s Shana news agency reported on Monday.

This means that the government is not allowed by law to increase its budget by cutting back on subsidies for energy, such as gasoline, diesel, gas, kerosene and electricity.

The decision was made after a meeting between Mohammad Baqer Nobakht, head of the Planning and Budget Organization of Iran who is also the government spokesperson and members of the parliamentary commission on Sunday.

According to Nobakht, the cash subsidy scheme has created a big hole in government finances. “At least 50% of the revenues (from subsidy reforms) must be spent on the cash subsidy payments,” Nobakht said earlier this month.

Recent government data shows $60 billion has been paid in cash subsidies under the so-called “Subsidy Reform Plan” ever since the controversial scheme was launched seven years ago.

The plan, launched in 2010 by former president Mahmoud Ahmadinejad, removed costly  subsidies on food and fuel and replaced it with a monthly 455,000 rials ($11) in cash payment to almost all Iranians.

Iran has a population of 80 million and the government says 77 million people receive the cash subsidies, costing the treasury almost $850 million per month.

— Price Hike Dispute

The prospect of higher energy tariffs has been the subject of heated debate among officials and experts over the past year. Gasoline prices, in particular, led to open dispute between the government and the previous parliament.

Last April a group of conservative-leaning lawmakers passed a law as part of the national budget that obliged the government to introduce two-tier prices for gasoline; a base price for subsidized gasoline and a higher price after car owners crossed a certain quota.

The legislation was seen as a setback for the Rouhani administration, which had eliminated gasoline quotas in May 2015. Gasoline since then is available at a single price for all consumers. Gasoline at the pumps is sold at 10,000 rials ($ 0.25) per liter.

A budget amendment by the new parliament in August revoked the two-tier price proposal and left the door open for getting rid of the fuel rationing system that many experts said was plagued with corruption.

Launched in 2007, the electronic fuel card system for all owners of vehicles was trumpeted as a means of curbing high consumption, adjusting prices and eliminating fuel smuggling to neighboring countries before the rationing was introduced.