Majlis Approves New Gasoline Pricing Scheme

Majlis Approves New  Gasoline Pricing SchemeMajlis Approves New  Gasoline Pricing Scheme

Majlis on Tuesday approved a bill that will see consumers pay up to double the amount they already pay for gasoline, if they exceed the ceiling on monthly consumption.

The law virtually gives a fresh lifeline to the nine-year-old electronic fuel card system whose functionality has been a sticking point between President Hassan Rouhani's moderate government and the conservative-leaning parliament in recent months.

Under the new law, which introduces a stepwise rise in prices, car owners are allowed to use up to 180 liters of gasoline a month at the current price of 10,000 rials (around 28 cents). But they will be charged 15,000 rials (43 cents) per liter for consuming up to 220 liters, 17,500 rials (50 cents) for 220-260 liters and 20,000 rials (57 cents) for those guzzling 260-300 liters.

The gasoline price and the function of electronic fuel cards have been the subject of protracted discussions between its advocates and opponents during the past year.

The Oil Ministry had just ruled out any rise in gasoline prices. Parliamentarians backing the new law say it does not mean multiple prices for the strategic fuel, arguing that it practically imposes higher costs on drivers who do not follow fuel-efficient driving habits.

The new plan will be implemented via the fuel card system that had essentially become irrelevant after the administration set a single gasoline price without a consumption cap.

The plan is a kind of return to the quota system that was in place in the last Iranian year (ended March 19), as it sets a new 180-liter ceiling for gasoline consumption.

--- 4-Month Deadline

Based on the legislation, the government must issue electronic fuel cards for all light and heavy vehicles that burn gasoline or use a dual-fuel engine, within four months.

In late May 2015, the government announced it would no longer allocate subsidized gasoline, among other types of fuel, to passenger vehicles at a price of 7,000 rials (20 cents) and regular gasoline would be offered at a single price of 10,000 rials for car owners nationwide without quota.

The former government started issuing fuel cards in 2007.

Distribution of gasoline with fuel cards was started eight years ago with the aim of achieving three main goals: curbing consumption, adjusting prices and cutting down fuel smuggling.

Oil Minister Bijan Namdar Zanganeh categorically supports scrapping fuel cards, saying that they are of no use now that prices have been unified and data obtained from fuel card is not used for any purpose.

***Pros and Cons

A member of Tehran Chamber of Commerce, Industries, Mines and Agriculture said on Tuesday the law is a positive step toward a stronger economy.

Bahram Arz-Aqdas noted that the rise in gasoline price can help curb air pollution in Iranian metropolises.

“Another important issue is the relation between fuels. When the gasoline price meets an increase, it raises transportation fees,” Arz-Aqdas added, saying gasoline price can influence the prices of diesel-fueled vehicles.

The official believes that along with the bill’s implementation, public transportation should be expanded.

Ahmad Tavakkoli, a member of the parliament who advocates the plan, stressed that the bill’s revenues will not benefit gas station owners, but “will be used as a means for policymaking in environmental issues, curbing consumption and reducing traffic congestion”.

Deputy Managing Director of National Iranian Oil Refining and Distribution Company Shahrokh Khosrovani also said that it is too early to comment on the issue but the smart fuel system is currently active and can be employed for any potential plan in the future.

“The bill must be approved by the Guardians Council and then be notified to the government as the executor of the plan,” he said, adding that the government must also endorse the plan in order to implement it.  

As an opponent to the bill, Farhad Dejpasand, deputy head of Management and Planning Organization of Iran, underlined that the plan will revive price inequality and said multiple prices for gasoline will give rise to problems for the government.

Dejpasand added that the bill will also raise inflation rate.