Economy, Domestic Economy

Gov’t-Majlis Subsidy Row

Gov’t-Majlis Subsidy RowGov’t-Majlis Subsidy Row

While lawmakers contend that the government is refusing to subsidize well-to-do Iranians, the government insists that it is waiting for the parliament’s final endorsement to begin preventing the rich from receiving monthly cash payments, Mehr news agency reported.

Although the parliament’s joint committee recently asked the government to exclude the households with monthly incomes of more than 25 million rials ($935 at official exchange rates) from the list of subsidy receivers, the government spokesman, Mohammad Bagher Nobakht, says the bill has to be ratified by the parliament, authorizing the government to remove the rich from the list of cash receivers.

However, there is consensus among lawmakers that it was basically the government’s idea to exclude the households with monthly income of more than 25 million rials from the pool of cash receivers. Earlier, the government asked the parliament to identify those eligible for receiving the monthly cash payment, so that the government can exclude the illegible subsidy receivers accordingly.

The government, in contrast, argues that it will neither take the risk nor it is possible to identify those whose monthly income exceeds 25 million rials.

The so-called ‘subsidy reform plan’ was launched in December 2010 by the government of former president Mahmoud Ahmadinejad in an effort to curb wasteful consumption and save billions of dollars in the government’s annual budget.

The main goal of the subsidy reform plan was to replace subsidies on food and energy with targeted social assistance. According to the plan’s initial outline, the amount saved by the government through the subsidies cut was supposed to be distributed as follows: 50% was to go to the poorest strata of the society; 20% to the government to compensate for increased costs or as safety net; and the remaining 30% was earmarked for improving the efficiency of public and industrial sections.

However, the previous administration widened the payment scheme to include almost all Iranians in a move that was interpreted by the economists and political elite as a “political gambit” aimed at attracting potential voters.  As a result of such mishandling, domestic industries suffered the most with a steep rise in energy costs that crippled their ability to compete with cheap imports.