Soymeal prices in the domestic market have soared by 200% compared to last year, says the head of Food Wholesalers Association, noting that soybean imports are entitled to subsidized foreign currency (at the rate of 42,000 rials per dollar).
“Last year [March 2020-21], each kilo of soymeal was sold at 68,000 rials [$0.24] in the local market, but this year [March 2021-22] it is priced at between 195,000 [$0.69] and 220,000 rials [$0.78] depending on the quality of the product,” Qasem Ali Hassani was quoted as saying by Fars News Agency.
Soybeans are imported as essential goods. After the oil is extracted, the meal is sent to the market for human consumption or as animal feed, he added.
Also known as necessity goods, essential goods are products consumers will buy, regardless of changes in income levels.
“Soymeal is sold at much higher prices than they should be. Commodities imported at subsidized foreign currency rates cost importers a sixth of their real price and should reach consumers at lower prices. Yet, what unfortunately happens in reality is that traders take advantage of the subsidized forex they receive and sell their products at prices many times higher than their actual price,” Hassani added.
Revocation Expected
The subsidized foreign currency allocation policy, which was ratified and implemented during the second term of former president, Hassan Rouhani, did not help the economy and only wasted the country’s forex reserves.
“It seems that the new administration headed by President Ebrahim Raeisi is well aware of this, which gives us hope for change,” says the head of Exports Confederation affiliated with Iran Chamber of Commerce, Industries, Mines and Agriculture.
“Raeisi’s administration has admitted that the policy gives rise to corruption, as some importers and consumers have been entirely left out of the benefits resulting from these allocated subsidies,” Mohammad Lahouti was also quoted as saying by Fars News Agency.
This is why the subsidized foreign currency allocation policy is expected to be gradually rescinded, he added.
“Within only four months after this faulty policy was implemented, orders for imports worth $80 billion were registered. The figure was unprecedented in the country’s import history. On the other hand, the government was unable to provide and allocate this volume,” he added.
Unfortunately, Lahouti explained, the policy remained intact due to the insistence of the government and parliament members.
“Despite all the hardship borne by the government to procure the required subsidized forex, the benefits never reached the public, causing their expenditure basket to shrink. The truth is that the subsidized forex turned into an opportunity for a few select individuals and businesses who never delivered on their commitments to import essential goods,” he said.
The official, who is also a member of the board of representatives at Tehran Chamber of Commerce, Industries, Mines and Agriculture, noted that when the policy was ratified, dollar rates in the market were hovering around 57,000 rials, but within a short period of time, the figure soared to 300,000 rials, providing a profitable opportunity for more rent-seekers.
“The former government realized how erroneous it was to subsidize foreign currency for importing essential goods at lower prices for domestic consumers, albeit too late. Now, with a new administration in office, we are hopeful that the policy will be repealed and replaced by regulations that directly support low-income households. The incumbent Cabinet has to remove subsidies on foreign currencies and increase the universal basic income allocated to the underprivileged by the profits made by selling forex at open market rates,” he said.
To bring this about, Lahouti concluded, the new government needs to begin collecting data from low-income households and allot each their due portion of cash subsidies.
*** $15b Supplied for Essential Imports in 4 Months
The Central Bank of Iran has provided $15 billion for the import of essential goods in the first four months of the current Iranian year (March 21-July 22), 27% more than the corresponding period of last year.
The provision of subsidized foreign currency at the rate of 42,000 rials per US dollar increased by 70% to reach $4.6 billion during the same period, the central bank reported on its website.
The latest CBI statistics show it has supplied $1,546 million to import corn, barley and wheat; $1,124 million to oilseeds and raw oil; $1,171 million to pharmaceuticals and medical equipment and $348 million to soymeal.
A total of $10.4 billion have been provided for importing other commodities, indicating a 15% growth year-on-year. For example, $3,564 million have been provided for importing machinery during the period.
A total of 10 million tons of essential goods worth $5.5 billion were cleared from Iranian customs terminals in the first five months of the current fiscal year (March 21-Aug. 22), registering a 17% and 68% growth in weight and value respectively year-on-year, the technical deputy of the Islamic Republic of Iran Customs Administration, Mehrdad Jamal Orounaqi, was quoted as saying by Mehr News Agency.
Fiscal 2020-21 Essential Imports in Review
A total of 23 million tons of essential goods worth $12 billion were imported into Iran during the last Iranian year (March 2020-21), according to the spokesperson of IRICA.
“The lion’s share of this sum, amounting to 13.44 million tons worth $3.74 billion, pertained to livestock and poultry feed. This volume accounted for 58% and 31% of the weight and value of last year’s total essential goods imports respectively,” Latifi was quoted as saying by IRNA.
The official noted that corn stood at 9.78 million tons worth $2.5 billion, soymeal at 1.82 million tons worth $793.94 million and barley at 1.83 million tons worth $457.32 million.
“Some 2.34 million tons of oilseeds worth $1.25 billion, in addition to 1.14 million tons of refined edible, semi-solid, liquid and unprocessed oils worth $1.06 billion were imported during the period under review.,” he added.
The imports also included 14,798 tons of human medicine as well as medical equipment worth $1.64 billion and 451,000 tons of livestock and poultry medicines worth $64.16 million.
“Our food imports also included 936,809 tons of rice worth $868.53 million, 3.02 million tons of wheat worth nearly $841.23 million, 1.01 million tons of unrefined sugar worth $370.66 million, 64,822 tons of dried tea leaves worth $329.12 million, 175,260 tons of different kinds of pulses worth $144.04 million, 30,487 tons of frozen or cold heavy livestock meat worth $133.27 million, 9,801 tons of butter worth $51.46 million and 4,422 tons of warm light livestock meat worth $29.17 million,” Latifi said.
He noted that imports of essential goods for industrial purposes and production mainly consisted of 51,415 tons of industrial machinery worth $510.8 million, 207,583 tons of different types of paper worth $190.1 million, 231,064 tons of paper pulp worth $181.06 million, 252,204 tons of fertilizers worth $153.08 million, 9,074 tons of chemical pesticides and insecticides worth $86.27 million and 6,019 seeds of different kinds of plants worth $83.63 million.
The IRICA spokesman concluded that a total of 76,716 tons of heavy vehicle tires worth $282.84 million were imported during the period under review.
According to IRICA chief Mehdi Mirashrafi, Iran imported 3.5 million tons of essential goods worth $9.7 billion from China, 5 million tons worth $9.6 billion from the UAE, $4.3 billion worth of goods from Turkey, 2.2 million tons worth $2.1 billion from India and 1.2 million tons worth $1.8 billion from Germany in the year to March 20.
