More than 60 companies affiliated to the government are on the verge of bankruptcy, the deputy economy minister for banking, insurance and state-run companies said.
“There are 451 state companies of which 354 are operating, 62 are in the liquidation process and 35 are inactive”, Abbas Hosseini told reporters on Tuesday.
Hosseini said that the lossmaking firms are subject to Article 141 of Trade Law, which says companies must start liquidation process if their accumulated losses exceed 50% of their capital, IBENA reported.
The Planning and Budget Organization has allocated 21,120 trillion rials ($70 billion) in the 2022-23 budget to government-controlled companies and state banks.
This is 34.4% higher from the 15,710 trillion rials ($52b) in the previous budget. State-run companies gobble up 60% of the government budget (running a huge deficit) for this year.
The banks getting government money are Bank Melli Iran, Bank Sepah, Bank Keshavarzi (Agro bank), Bank of Industry and Mine, Export Development Bank of Iran, Post Bank of Iran, Tose'e Ta'avon Bank (Cooperatives Development Bank) and Bank Maskan – the main housing lender.
According to Hosseini, the lion’s share of government spending goes for nine companies, including Bank Melli Iran, Bank Sepah, Central Insurance company of Iran, Abadan Refineries Company, National Iranian Gas Company, National Iranian Oil Company, Arak Oil Refineries Company etc.
Regarding the finances of state firms in fiscal 2020-21, Hosseini said the companies generated 370 trillion rials ($1.2 billion) in consolidated profit that was the total profit made by all companies in the business group.
He said seven companies account for 93% of the profit. Without mentioning the exact individual losses, the senior official said seven companies accounted for 98% of the loss, among them the Airline of Islamic Republic of Iran, Iran Water Resources Management and the National Iranian Gas Company.
Supreme Audit Court (SAC), the supervisory arm of the parliament, forecasted last year that nine banks and one for-profit organization, 154 are predicted to be profitmaking, 199 to be break-even (expenses and revenue are equal) and 24 were projected to be in the red during the current fiscal year.
On why state companies are sinking in the red, the report pointed to the coercion to sell goods on mandatory pricing by the government, high costs, ageing and dilapidated equipment and machinery, failure to realize income targets, the US sanctions and ordering state banks to lend beyond their ability.
