Economy, Domestic Economy

Cash Subsidy List Cut by 2m

Cash Subsidy List Cut by 2mCash Subsidy List Cut by 2m

The government officially announced on Monday that it will further reduce its heavy subsidy burden by removing two million people from the cash subsidy list before the month is out.

Ali Rabiei, the minister of cooperatives, labor and social affairs said: “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.”

According the minister, the aim of the controversial subsidy program is, 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.

He likened the society to a “U-shaped curve” and said the haves and have-nots are at the end points of this curve, while the middleclass is around the center. “We need to be more careful when removing people from the cash subsidy list,” he said noting that a large group falls into the middleclass, which according to reports has been at the receiving end of the galloping inflation and rising prices of food, energy, housing and education.

Rabiei also took stock of the unacceptably poor work ethics and low productivity in the country and called for an effective plan of action to reform work ethics “without which sustainable development would remain a far cry.”

One primary step in countries known today as the developed world was to improve and enhance the productivity of both human resources and investments; the local media quoted the minister as saying.

The Subsidy Reform Plan launched in 2010 by former president Mahmoud Ahmadinejad, got rid of expensive subsidies on food and energy and instead paid 450,000 rials ($13) to almost all Iranians on a monthly basis. Official reports have it that the annual cash subsidy bill reached close to $24 billion and when oil started taking a beating from over a years ago, it became abundantly clear that paying the astronomical amount was all but unsustainable by the Rouhani administration.

 appeal falls on deaf ears

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 it seems the appeal fell on deaf ears as only a small fraction of the 80 million people complied.

Soon after, relevant organizations said that 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).

Over the past several months, informed minds both in and outside the government have publicly called for significantly cutting the cash subsidy list and gradually getting rid of the subsidy policy “once and for all.” 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 simply unable to dole out the monthly payments.

At the weekend, Oil Minister Bijan Namdar Zanganeh told a live primetime TV program that his ministry alone has to pay “$27 million every day” to a special fund for the cash subsidy program. With such tremendous subsidy cost imposed on the national treasury, most development and infrastructure plans have been put on hold due to lack of funds.

It is for this and a host of other valid reasons that prominent economic experts and academia unrelated to the government have been urged the government to “mobilize the necessary audacity and publicly declare” that the cash subsidy program is over as it was a monumental error of judgment since inception.