Domestic Economy

Cash Subsidy List Cut Short by 2.9m

Cash Subsidy List  Cut Short by 2.9mCash Subsidy List  Cut Short by 2.9m

The government has removed 2,943,000 individuals from the cash subsidy list, says the Minister of Cooperatives, Labor and Social Affairs Ali Rabiei.

"Under 80% of those who were subjected to the cancellation did not complain and 66% of those who did reclaimed their cash payments," he said.

The Subsidy Reform Plan launched in 2010 by former president Mahmoud Ahmadinejad removed heavy subsidies on food and energy, and instead paid 450,000 rials ($13) to almost all Iranians on a monthly basis, ISNA reported.

When oil began to take a beating from over a year ago, it became abundantly clear that paying the astronomical amount was all but unsustainable by the President Hassan Rouhani administration.

Even before the demise of the $110-a-barrel oil, after taking office in the summer of 2013, the government urged the people registering for the subsidy to declare their net worth and pleaded with those with enough monthly income to voluntarily refrain from registering for the monthly cash payment. However, only a small fraction of the recipients complied. Soon after, relevant organizations said those with decent incomes who had insisted on receiving the monthly payment would have their assets and holdings investigated, be removed from the subsidy list and possibly also be penalized for providing false information on their assets/revenues.

Over the past several months, informed sources both in and outside the government have publicly called for a significant cutback on the cash subsidies and gradually getting rid of the subsidy policy “altogether”. Although the government has so far not said in so many words, it is amply clear that with the price of oil in international markets cut by more than half, it is finding it difficult to make the monthly payments.

Aides of President Rouhani regularly take turns to go public with the case against the high and rising cost of the cash subsidy program. Economy Minister Ali Tayyebnia said not very long ago that he "has nightmares every month when it is time to deposit the monthly cash subsidy" into the accounts of nearly 74 million recipients. The Iranian population was 79,476,308 at the time of going to print.

Official records have it that the annual cost of the cash payment program is a whopping $12.7 billion. Small wonder the minster and others get nightmares when they have to find more than $1 billion every month!

The visible exercise in futility (the 450,000 rials does not buy much … not more than the price of 1.5 kg of meat) can be better understood by also noting that poor oil is getting poorer in the tortuous international markets overflowing with cheap oil.

Seen from another angle, official data show government receipts from oil when the controversial program was launched were in the neighborhood of $120 billion a year. Today that amount is less than $20 billion. With government coffers getting smaller and the cost of running the oil-based economy rising at terrible speed, the cash subsidy program has been dismissed as "poison" by economists and social scientists of all schools of thought.

One observer more recently made an interesting point by declaring that the prohibitive subsidy program "has effectively placed the entire population on government payroll."

"Are these 74 million really so poor that they cannot live without this handout?" he asked.

Talking on condition that he not be identified, the university instructor echoed the demand of many others calling on the government to instead direct the billions in cash subsidy to the limping manufacturing sector that can lift the national economy and move the millions from the dole queue to fulltime payrolls.