Economy, Domestic Economy

Government May Further Shorten Cash Subsidy List

Government May Further Shorten Cash Subsidy List Government May Further Shorten Cash Subsidy List

The Minister of Cooperatives, Labor and Social Affairs Ali Rabiei says four million people will be removed from the list of cash subsidies as per a decision by the parliament.

“We take into account people's homes, cars, income and even their holiday trips to determine who should be removed from the cash subsidy list,” Mehr News Agency quoted him as saying.

According to the minister, the government has so far delisted over 2.1 million Iranians from the highly controversial cash subsidy payment.

Back in April, parliament tasked the government to remove 24 million people from the cash list and instead use the money for creating jobs.

Lawmakers decided that cash subsidies for the following high earners be phased out by the end of the current fiscal year (March 2017):

- Merchants and business owners annually making more than 350 million rials ($10,000).

- Members of the parliament, judges, faculty members of universities, education and research centers (public or private), physicians and dentists.

- Civil servants, employees of government or non-government organizations, senior officials of municipalities, members of the armed forces and Social Security Organization retirees earning more than 350 million rials a year.

- Executives and members of the board of directors of public and private companies, companies affiliated to the government or non-governmental organizations, as well as banks, insurance companies, credit and finance institutions earning more than 350 million rials annually.

- Iranian expatriates

- Individuals constituting the first three high-income deciles of the population not mentioned above.

The direct cash payment is part of the government’s Subsidy Reform Plan that was introduced during former president Mahmoud Ahmadinejad’s administration and passed by the parliament in January 2010.

As per the initial plan, heavy subsidies on food and fuel were removed and instead every Iranian was entitled to a monthly payment of 450,000 rials ($12.8 at current market exchange rates).

The annual cash subsidy bill amounts to around $12 billion.

Even before the demise of $110 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 cash subsidy. The earnest appeal fell on deaf ears as only a tiny fraction of the 80 million people complied. Recent reports said 70 million plus people are receiving the payment the government says it simply cannot afford.

Soon after, relevant organizations said 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 be penalized for providing false information on their income/assets when applying for the cash.

“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,” Rabiei was quoted as saying earlier.

According to the minister, the intended aim of the subsidy program was, among other things, to improve the quality of life of the poor and vulnerable, raise the quality of healthcare, assist school dropouts and help meet the nutritional needs of low-income households.

It remains to be seen how much longer the government can carry this extra economic burden that has been often criticized and condemned by seasoned experts many of whom have publicly said that this policy of paying money to the millions of people is like "poison for the economy."