Energy subsidy payments will be optimized in Qeshm Island by launching a pilot scheme whereby households are provided with newly-designed energy cards, managing director of the Iranian Fuel Conservation Company (IFCO), Nosratollah Seifi said at a press conference on Sunday, IRNA reported.
Energy credits are allocated per capita in proportion to consumption standards. The energy cards, called 'Sahmia'(Farsi abbreviation for Iranian Smart Subsidy Management System), provide the populace with certain amount of energy credit, which can be utilized to pay bills, including water, electricity, and gas, or purchase fuel such as gasoline, compressed natural gas (CNG) or diesel.
The flexibility provided by Sahmia helps manage consumption by determining the amount and type of energy carrier they prefer.
Subsidies
Iran's primary energy consumption has grown by more than 50 percent over the past 10 years. In order to curtail wasteful energy use and to limit domestic demand growth, Iran has embarked on an energy subsidy reform to raise the prices of domestic petroleum, natural gas, and electricity. The first phase of the reform was enacted in late 2010, and phase two was initiated in early 2014.
Under a five-year plan started in December 2010, and promoted as an “economic revolution” by former president Mahmoud Ahmadinejad, Iran began slashing three-decades-old subsidies on sensitive energy and food items, replacing them with disputable cash payments to the poorest of the population.
The reform, officially referred to as Targeted Subsidy Reform, made Iran the first major energy producing and exporting country to cut drastically massive indirect subsidies to energy products and replace them with across the board energy dividend transfers to the population. It is estimated that the price increases removed close to $50–$60 billion dollars in annual product subsidies.
Prior to the reform, the government started rationing gasoline in 2007 after launching a smart fuel distribution system, whereby an individual is given a certain quota per month. Gasoline in excess of the quota should be purchased at a higher price.
Shortcoming
However, a main drawback of the current system is that the subsidized fuel is allocated to vehicles rather than individuals. Thus, affluent people are entitled to as much subsidized fuel as the number of the cars they posses, whereas people with no vehicle are deprived of such subsidy.
Sahmia energy card has addressed this issue by providing individual energy credits as per capita, which can be used to both pay energy bills and purchase a fixed amount of fuel per month.
Households that have consumed less than provided are able to store their quota for future use, transfer it to another card, or even sell it to others. IFCO is planning to provide the ground for supply of excess quotas in the energy bourse, so that individuals can trade their surplus energy credit.
Preventing excessive liquidity distribution, curbing inflation, increasing energy efficiency, closing the gap between current and actual prices, fair distribution of national wealth, and modifying energy consumption patterns are among the advantages of the new plan.
Qeshm Island is located a few kilometers off the southern coast of Iran in the Persian Gulf. The island, which hosts a 300-square-kilometre (116-square-mile) free zone jurisdiction, is 135 km long, and comprises 59 towns and villages with a population of approximately 100,000.
