Economy, Domestic Economy

Gov’t Approves $450m in Production Subsidies

Gov’t Approves $450m in Production Subsidies
Gov’t Approves $450m in Production Subsidies

The office of vice president for strategic planning and supervision has approved the allocation of 12,000 billion rials ($450 million) in subsidies to the manufacturing sector, as announced by the deputy minister of industry, mine and trade.

The industry ministry has stated that the production subsidies will be paid in the form of bank loans to generate cash flows, while giving priority to competitive industries, IRNA reported.

The government’s limited resources to finance the subsidies make it essential to prioritize the industries on the basis of their performance. Experts believe that the government has a tough job ahead to finance the production subsidies through prioritizing the companies at the receiving end of the loans.

One policy adopted by the government for the subsidy payment is prioritizing the industries on the basis of their competitiveness. Competitiveness is a term used broadly to indicate the companies’ performance in domestic and international market, in terms of productivity and innovation.

In order to evaluate the companies’ competitiveness, the government must define clear technical indices and factors to distinguish the active companies from inactive ones, giving top priority to those that have succeeded in creating domestic brands of high standard.

Experts suggest other factors be used for evaluating the companies such as export capability, energy efficiency, production rate, recruitment rate and procedures, outstanding bank liabilities, production standards, customer services and customer satisfaction to name a few.

The deputy industry minister said the ministry has earmarked 12,000 billion rials ($450 million) to the Bank of Industry and Mines (BIM), which would in turn pay twice of this amount as cash flow to applicants from industrial and mining sectors.

Referring to the government’s approach to identify competitive industries, Mohsen Salehinia said, “Those enterprises that prove most effective in coming out of recession will be given priority.”

The new policy for allocation of production subsidies has raised concerns among small and medium industries, which are particularly worried that the government’s policy is intended at paying subsidies only to large-scale industries and the parent companies.

Owners of small enterprises and industrial units expect the government to allocate a substantial portion of the production subsidies to alleviate their problems regarding shortage of cash flow.

Meanwhile, the entrepreneurs and private sector industrialists are waiting to see how the government will perform in allocating the production subsidies and whether it will take notice of small and medium industries or will just neglect them as the previous government did.