Domestic Economy

Gov’t Tasked With Narrowing Cash Subsidy List by 24m

Gov’t Tasked With Narrowing Cash Subsidy List by 24mGov’t Tasked With Narrowing Cash Subsidy List by 24m

The government has been tasked by the parliament to remove 24 million people from the list of cash subsidy recipients and spend the saved financial resources on job creation, lawmaker Mohammad Reza Pour-Ebrahimi has announced.

“Under Iranian law, cash subsidies should be allocated in proportion to household incomes,” IRNA quoted Pour-Ebrahimi as saying.

High Earners

According to the lawmaker, cash subsidies for the following high earners will be phased out during the new Iranian year (started March 20):

- All merchants and business owners annually earning more than 350 million rials (around $10,000 at market exchange rate);

- Members of the Iranian Parliament, judges, faculty members of universities, education and research centers (public or private), physicians and dentists.

- All civil servants, employees of governmental or non-governmental organizations, top officials of municipalities, military personnel and Social Security Organization retirees annually earning more than 350 million rials.

- All executives and members of the board of directors of public and private companies, companies affiliated to the government or non-governmental organizations, as well as banks, insurance companies, credit and finance institutions receiving more than 350 million rials (around $10,000) annually

- Iranian expatriates

- All individuals constituting the first three high-income deciles of the population not mentioned above.

The direct cash payment is part of the government’s Subsidy Reform Plan that was introduced during former president Mahmoud Ahmadinejad’s administration and passed by the Iranian Parliament on January 5, 2010.

As per the initial plan, heavy subsidies on food and energy were removed and instead all Iranians were individually paid 450,000 rials (around $12.8) on a monthly basis.

Official reports state that the annual cash subsidy bill amounted to $24 billion. But when oil began its downward slide some two years ago, it became abundantly clear that paying the astronomical monthly subsidy was unsustainable for the administration of President Hassan Rouhani.

Even before the demise of $110-a-barrel oil, the government that took office in the summer of 2013 urged the people registering for the subsidy to declare their net worth and pleaded with those with enough monthly income to voluntarily not register for the monthly cash payment. But the appeal largely fell on deaf ears, as only a small fraction of the 80 million people 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 when registering for the cash subsidy).

Last December, the Minister of Cooperatives, Labor and Social Affairs Ali Rabiei announced that the government has removed 2,943,000 individuals from the cash subsidy list.

“The money (cash payments by the government) is for the needy and those struggling to make ends meet. It is not for people capable of leading a decent life … As per our indices and eligibility norms for deleting the names of those on the subsidy list, workers and retirees will continue to receive the cash payments,” he had said.

According to Rabiei, the aim of the controversial subsidy program was, among other things, to improve the quality of life of the poor and vulnerable, raise the quality of healthcare, assist school dropouts and address the nutritional needs of low-income households.