Further Cuts in Gasoline Subsidies Possible

Further Cuts in Gasoline Subsidies PossibleFurther Cuts in Gasoline Subsidies Possible

Gasoline could be offered at a single rate of 10,000 rials (around 30 cents) per liter for passenger vehicles this week in petrol stations nationwide, following a delay in recharging of smart fuel cards for the May 22-June 21 period, head of the Iran Petrol Station Owners Syndicate said, Mehr news agency reported on Saturday.

"The discontinuation of subsidized gasoline is a possibility," Bijan Haj-Mohammadreza said, stressing that the measure could help reduce challenges to gasoline distribution to petrol stations.

Officials from the oil ministry or the National Iranian Oil Company (NIOC) haven't commented on the new pricing scheme yet. The government currently offers 60 liters of subsidized gasoline monthly to passenger cars and motorbikes with 1,800cc-capacity engines or below via smart fuel cards at 7,000 rials per liter. But the delay in recharging fuel cards for the present Iranian month (Khordad) has triggered speculations that the government is planning to remove subsidies and sell gasoline at a single price.

The official stressed that the government and the oil ministry can implement any change in gasoline quotas or prices within two hours, using advanced software systems.

However, he said the delay has resulted in complaints and discontent among car owners. "There were reports of brawls at petrol stations because some drivers had assumed that petrol station workers or owners deliberately manipulated systems to block fuel cards." Despite the delay in recharging of fuel cards for passenger cars, public transport vehicles have received their monthly quota of subsidized gasoline.

In 2007, the government started issuing electronic fuel cards to curb, and systematically keep track of fuel consumption across the country. In December 2010, as part of the first phase of the national subsidy reform plan, the government offered car owners monthly gasoline quotas. The subsidized price of rationed gasoline has increased since then, but still remains well below international prices.

Vehicle owners have been allowed to purchase extra fuel at higher prices. But even these prices are lower than international prices.

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 controversial cash payments.

Subsidized price for gasoline was set at 1,000 rials and the free price at 4,000 in 2010. The subsidized price was then raised to 4,000 rials in mid-2012, and the free price to 7,000 rials. The subsidized and free market prices were for the third time raised in April 2014 to 7,000 and 10,000 rials respectively.