More than 60% of respondents to a recent survey reacted negatively to the recent subsidy reform implemented by the government, mostly because following its implementation, the prices of items other than essential goods also increased.
A pollster affiliated to Majlis Research Center, the research arm of Iranian Parliament, found over 58% prefer the prices of essential goods to decline to last year’s level, or receive them via coupon, compared to 28% who favor an additional direct monthly cash subsidy.
The government of President Ebrahim Raisi’s recent removal of subsidies on import of essential goods was among its key economic decision. Instead, the government started depositing subsidies directly to the bank accounts of needy households.
To cushion the blow of price increases, the parliament required the government to provide people with electronic coupons. More than 88% of respondents don’t consider the cash subsidies to be adequate, as large families have been hit harder by the economic consequences of price increases, the Persian daily Etemad reported.
The survey also shows that the purchasing power for essential goods has decreased compared with the beginning of the year (right before the implementation of the plan) and therefore, 58.5% of people prefer the government to reduce the prices of seven essential items to the levels they were last year in the form of electronic coupons while 28.6% prefer monthly cash subsidies.
Of the people who prefer coupons to cash subsides, 56.2% said they prefer coupons even if they are only redeemable at specific stores.
Hadi Sobhanian, an official with the Ministry of Economic Affairs and Finance, recently talked of a pilot coupon project starting as of the seventh month of the Iranian year (starting Sept. 23).
“The launch of coupon system has been mandated to the government, that it is the law and the government is willing to act in accordance with it, but infrastructures are not yet in place,” he said.
“The Ministry of Cooperatives, Labor and Social Welfare and the Central Bank of Iran are working on the project and technical infrastructures have been put in place; it is possible to launch the pilot coupon project for some items next month.”
Proponents and Opponents
Coupons used to be given to people up until the fiscal 2008-9, when the cash subsidies came in their stead. The coupon system has its own proponents and opponents. Opponents believe that it is a failed system, the reinstatement of which would waste time and impose unnecessary costs. They say the allocation of additional cash subsidies is wiser, as they will be able to spend money based on their own needs.
On the other hand, despite the claim that only four essential items have seen price increases, many more commodities have become costlier. With coupons, people would only be able to buy few specific items. Just like old years, people might resort to selling their coupons to gain access to cash and here the middlemen will benefit.
The cost of launching an electronic coupon system is another drawback, as the equipment for implementing it would cost 9,000 billion rials (around $30 million) whereas the cash subsidy system does not require any extra outlay. It would be much more economical for the government.
Proponents of the coupon system believe it is a safer way of supporting low-income households because under the current conditions, it will improve people’s livelihoods and won’t drive up the inflation rate (provided there is careful monitoring over the distribution of goods). In addition, by allocating coupons, it would be possible to ensure the provision of the minimum food needed by a household; households will be able to prepare and use the food they need at an approved price during a month.
Proponents say that compared with the allocation of additional cash subsidies, the coupon system would be effective in controlling the growth of money supply and budget deficit.
