Boosting industrial production is at the heart of the Ministry of Industries, Mines and Trade’s plans for the coming years. In a report released in May, the ministry had set out objectives to increase production in key industrial sectors over the next three years.
At a meeting held between members of the Parliamentary Group for National Production and Employment and officials from the ministry on Tuesday, the two parties focused on removing barriers to growth in the industrial sector.
Increasing Working Capital
Increasing the working capital of industrial enterprises was the first issue discussed in the meeting.
“Shortage of working capital has pushed many industrial units into recession in recent years,” said Gholamreza Kateb, the head of the Parliamentary Group.
“Boosting production would help the government create more employment opportunities, leading to overall economic prosperity,” he noted.
A bill proposed by the Cabinet of President Hassan Rouhani in August 2014 is focused on removing the barriers to competitive production and improving the country’s financial system. The bill, which was recently approved by the parliament, calls on the Central Bank of Iran to provide incentives to the manufacturing sector. Implementation of the bill is expected to help solve many of the production sector’s financial problems.
Cheap Energy
The government’s recent decision to remove energy subsidies and its impact on industries were other issues discussed in the meeting.
“The government should extend its support to the industrial units as they no longer have access to cheap energy in the absence of government subsidies,” said Kateb.
Kateb noted that the budget for the current fiscal year (started March 21) allocates 52 trillion rials ($1.6 billion at market exchange rate) from the removal of energy subsidies to the industrial sector. He called on the Industries Ministry to use the allocated budget to support energy-intensive industries.
Concluding Unfinished Projects
Giving priority to concluding unfinished industrial projects with more than 90% progress was mentioned as another measure to boost production and economic growth.
Last year, the Industries Ministry had prepared a list of 246 projects with more than 80% physical progress. According to Kateb, these projects could become operational with “modest investments.”
Mining Royalties
Allocation of mining royalties was another topic brought up in the meeting. Iran’s mining law calls for allocating 65% of mining royalties collected by the government to the Ministry of Industries, Mines and Trade towards development of mining infrastructure. The law also calls for spending 15% of the royalties in regions where mineral extractions have taken place as compensation for possible damage to local infrastructure, including environmental and road damage.
But in practice, the ministry has never been able to claim its true share of the mining royalties, which could go a long way in improving the infrastructure and upgrading outdated mining equipment.
According to head of the Parliamentary Commission for Industries and Mines Reza Rahmani, less than 20% of the mining royalties have so far been allocated to the ministry since the law’s approval.
“The former government spent only 1.5-2.5% of the royalties towards improving the local infrastructure,” said Rahmani.
Manufacturers’ Share of Banking Incentives
As another way to boost production, the meeting proposed increasing the manufacturing sector’s share of banking incentives.
“The manufacturing sector currently receives about 31% of total incentives offered by the banks. This figure must increase to 40%,” said Kateb.
He also noted that the share of incentives offered to the service sector must be brought down from the current 37%, directing the liquidity and banking loans to the manufacturing sector instead.
