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Industry Sector in Budget Bill
Economy, Domestic Economy

Industry Sector in Budget Bill

The Rouhani administration has submitted next year’s budget bill to the parliament amid plunging oil prices, sanctions and other economic problems that have left a contracting impact on the budget allocated to different sectors.
In comparing the budget earmarked for the industry and mining sector in the upcoming year with that of the current year, six major differences are seen as striking. Donya-e-Eghtesad has outlined the differences in a report as follows:
1. Under Note 5 (m), the capital of specialized funds in the industry and mining sector has increased. In the budget proposed to the parliament on Dec. 7, the administration’s contribution to the capital of Export Guarantee Fund (EGF) has increased by $200 million. Similarly, electronic and maritime industries as well as the Mining Activities Insurance Fund and Investment Guarantee Fund for Small Enterprises have been allocated $25 million each from the installments deposited with the Foreign Currency Reserve Account.  As the capital ceiling of certain funds has already been set in bylaws, the new allocations cannot be implemented unless the bylaws are modified accordingly.
2. In Note 10 (a), the budget bill has allotted 5,900 billion rials ($219.3 million at official exchange rate) to Iran Mines and Mining Industries Development and Renovation Organization (IMIDRO) from its usufruct of 13,000 billion rials. The new figure, which shows 61 percent growth compared with the 2014-15 budget, should be spent on exploration projects, R&D, ecological plans and laying mining infrastructure. Similarly, the share of Geological Survey of Iran (GSI) has also increased by 10 percent to reach 600 billion rials in the new budget from 315 billion rials in the current fiscal year.
3. In Note 5 (h), the administration has increased foreign currency deposit from the resources of the National Development Fund of Iran (NDFI) by 50 percent in order to issue guarantee letters or provide financial help for the exporters of goods and technical and engineering services or for those Iranian contractors who have won foreign tenders and need to equip their workshops or use it as advance payment. The designated credit for this purpose is $3 billion. In the current fiscal year, the figure stands at $2 billion.
4. Under Note 21 (b) of the budget bill, the share of the manufacturing sector from the revenue generated out of subsidy reforms has decreased by 50 percent to reach 52,000 billion rials, while the expected ceiling of such revenue has remained unchanged at 480,000 billion rials. However, an increase or decrease in the proposed figure is not sufficient by itself as what matters is the actual credit allocated. As a case in point, in 2013, the approved figure was 20,000 billion rials of which nothing was actually allocated to the manufacturing sector.
5. For the next year, the administration has completely removed the $5.3-billion allocation from NDFI resources as finance for the working capital of manufacturing units. The administration allocated the figure this year in the form of deposits with specialized banks of Keshavarzi (Agriculture) and San’at va Ma’dan (Industry and Mine).
6. In the proposed budget bill, the administration has failed to specify a clear and targeted approach in allocating loans or credit lines from NDFI resources, while the 2014-15 budget law has outlined the sectors that are to benefit from NDFI resources in a clear, detailed and targeted manner.
The report further reveals that the administration has adopted an overall expansionary approach in budget sections dedicated to capital asset acquisition in the industry and mining sector, showing 25 percent growth. In miscellaneous budget sections, the administration has highlighted mining infrastructure development in order to enforce mining law. Developing mining exploration projects and strengthening the relevant development funds as well as improving supervision and laboratory infrastructure of the National Standard Organization are among other areas of attention in this section of the proposed budget.  
In addition, similar to previous years, the administration has considered other credits to revitalize less developed regions, particularly in the southern coastal areas.
Meanwhile, development-oriented organizations such as IMIDRO, Iran Industrial Renovation and Development Organization (IDRO), and Iran Small Industries and Industrial Parks Organization (ISIPO) will enjoy sufficient resources to realize their development objectives if privatization continues as per the provision of Section 29 of overall policies of Article 44 of the Constitution.

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