Economy, Domestic Economy

First VP Blasts Cash Subsidy Scheme

First VP Blasts Cash Subsidy SchemeFirst VP Blasts Cash Subsidy Scheme

The policy of distributing cash subsidies among citizens was wrong in the first place, First Vice-President, Es’haq Jahangiri, said on Tuesday.

“The government is annually spending nearly 420 trillion rials (about $15.5 billion) on cash subsidies, whereas the revenues generated from raising the prices of energy carries hardly reach 320 trillion rials (about $11.8 billion) per annum, “he was quoted by Mehr news agency as saying, referring to the so-called ‘Subsidy Reform Plan’ that was launched in December 2010 by the government of former president Mahmoud Ahmadinejad.

The plan’s main goal was to replace subsidies on food and energy with targeted social assistance to low-income households. 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 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.

The Rouhani administration has criticized the current cash payments ever since it assumed office in September 2013.

The government has been recently seeking to exclude the households with monthly incomes of more than 25 million rials (about $930) from the subsidy list. The move, if approved by the parliament, is expected to help the government save billions of dollars.