Economy, Domestic Economy

The Case of High Production Costs in Iran

The Case of High Production Costs in IranThe Case of High Production Costs in Iran

In Iran, agricultural and industrial production costs are high.

This is mainly due to the high inflation rate, high interest loans, expensive raw materials and low productivity.

What follows is a report in this regard written by Ahmad Sadeqian, a member of the Board of Directors at Tehran Chamber of Commerce, Industries, Mines and Agriculture.

The article was originally published on TCCIMA’s news portal.

Last week, chicken breeders demonstrated before the Presidential Office to protest against the recent losses incurred by them. Poultry farmers say they are on the brink of bankruptcy because their costs outweigh sales.

Chicken production capacity stands at 2 million tons [per annum] whereas consumption hardly reaches half this amount. So there is no way but to export the excess. There is no denying that production at only half the capacity jacks up the cost and the end-price.

Agricultural and industrial products carry a high price tag due to inflation, high interest loans, low productivity and expensive raw materials. Occasional bans placed on the import of raw materials also add insult to injury.

Take the price of wheat as an example. The global price of wheat stands at 7,000 rials, but once it is shipped into the country the prices range from 6,650 rials for bakeries to 9,000 rials for guilds and industries, and 12,800 rials for the government’s strategic purchases.   

On the other hand, the country lacks suitable infrastructures. That profiteers buy wheat at the price of 9,000 rials and resell it to the government at 12,800 rials has become a problem.

We have put forward the suggestion that the government stop guaranteed purchases. It needs to help the farmers by taking their records, the size of the farm they cultivate and their harvest volume into account.

Cash subsidies should be replaced by seeds, fertilizers and helping farmers mechanize their land.

In addition, the prices need to be adjusted based on supply, demand and global prices.

Once all these come to pass, the feelings of apprehension will go away and the business would benefit bakeries, guilds and industries equally.