Shortweighting Proliferates, Damages Consumer Confidence

Shortweighting has been on the rise ever since the government overhauled its subsidy program, says the head of Iran’s National Standards Organization.
“Our random inspection of 365 products showed 41.25% of big brands in the market are shortweighting,” Mehdi Eslampanah was also quoted as saying by IRIB News, adding that the practice has damaged consumer confidence.
Giving examples of shortweighting in the market, the official referred to a wide range of products, including potato chips, dairy products, detergents, gasoline, CNG, automobile, steel and cement.
Shortweighting, which is giving less than the weight charged for, is forbidden by Islam and the country’s law.
Noting that Tehran and Alborz account for 40% of Iran’s market supply, Eslampanah said plans are underway to initiate policing measures soon against shortweighting in the two provinces.
“In the first stage, the action will be focused on products targeted by the government’s subsidy overhaul policy,” he added.
The caretaker of the so-called Consumers and Producers Rights Protection Organization said that if this trend is not countered, shortweighting will proliferate even further.
“We get about 60,000 complaints from consumers on a daily basis. Most of them are about shortweighting,” Sadif Beikzadeh was quoted as saying by Far News Agency.
He added that ever since the mandate for producers to print prices on their products, suppliers have not been able to directly increase prices, so they have resorted to indirect measures, such as shortweighting.
Beikzadeh said producers justify shortweighting by saying that they do this because they are not allowed to increase prices, despite recently hiking prices drastically.

Gov’t Overhauls Subsidy Regime

Recent days have seen a drastic rise in the prices of goods and services following the government decision to overhaul the import subsidy system.
The government recently decided to abolish the controversial practice of allocating cheap dollars at the rate of 42,000 rials per dollar, locally known as Preferential Foreign Currency, to import essential goods, including corn, soymeal, unprocessed oil, oilseeds and barley, in addition to wheat, flour and medicine.
Instead, it is depositing cash directly to the account of income deciles 1 to 9.
The market value of the dollar is above 300,000 rials now.
“Until now, we have been paying to producers [read importers] but now the subsidies go to consumers. In fact, the Preferential Foreign Currency has not been ceased, rather the allocation method has changed,” President Ebrahim Raisi said in a televised speech on the eve of the introduction of the move last month.
In his speech, Raisi emphasized that the removal of cheap dollar allocation will not lead to a price rise in wheat, flour and medicine. However, the move has led to a dramatic rise in the prices of essential goods.
Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.
The prices of other food products have also risen suddenly in a ripple effect.
Later, it was announced that the value-added tax on a list of essential  goods have declined from 9% to 1%.
The decision made by the Supreme Economic Council has been communicated by the secretary of the council, Mohsen Rezaei, to the economy and agriculture ministries, IRNA reported.
The reduction in VAT rate applies to the import of wheat, rice, oil seeds, unprocessed edible oil, lentil, peas, beans, mung bean, sugar, sugar cube, chicken meat, red meat and tea.
Notably, sugar and sugar cubes produced locally are also entitled to the VAT cut.
The Supreme Economic Council, co-chaired by the head of three branches of power, namely judiciary, executive (president) and parliament, is an ad-hoc entity tasked with taking measures at the time of economic crisis and sanctions. It remains to be seen how the new VAT measure will culminate in stopping the skyrocketing prices.

Food Inflation Near 50%

Latest data released by the Statistical Center of Iran show the average annualized food inflation stood at 49.6% in the month to May 21. 
The Consumer Price Index of “food and beverage” group stood at 586.1 in the month under review (the second month of the current Iranian year), indicating a 3.3% increase against the previous month.
The index registered a year-on-year increase of 49.6%.
With 26.64%, the “food and beverage” group has a major impact on the overall inflation rate.
The overall goods and services CPI in the 12-month period ending May 21 increased by 38.7% compared with the corresponding period of the year before.
The general goods and services Consumer Price Index (using the Iranian year to March 2017 as the base year) stood at 429.6 for the month to May 21, indicating a 3.5% rise compared to the month before — the highest in six months.
Consumer price inflation for the month under review (April 21-May 21) jumped by 39.3% over the same month in the previous fiscal year while year-on-year inflation in the month ending April 20 was 35.6%. 
SCI put average inflation for urban and rural areas at 38.3% and 40.8%, respectively. CPI registered a YOY increase of 39.2% for urban areas and 40.1% for rural areas in the month. 
The overall CPI reached 424.4 for urban households and 459.2 for rural households, indicating a month-on-month increase of 3.7% and 2.8%, respectively.
According to SCI, the biggest month-on-month price rise for a food item in urban areas was recorded for macaroni with 49%.
The dramatic rise came after the government liberalized flour prices, leading to a chain of price hikes in downstream food industries, including macaroni, confectionaries and baby food. 
The second and third biggest month-on-month price increase during the period under review was registered for vegetable oil with 22.3% and hydrogenated oil with 19%. 
Compared with the same month of the previous year, the retail prices of potato increased by 175.1%, registering the highest year-on-year price rise.
The second and third biggest year-on-year price rise was registered for first-grade Iranian rice with 126.8% and tomato paste with 108.8%.