The infrastructure to restart use of smart fuel cards for fuel rationing is almost ready, a member of the Majlis Energy Commission said.
"Under the planned rationing system the government wants to sell between 60 to 80 liters of subsidized gasoline per month per car at 10,000 rials (7 cents) per liter for vehicles with engines below 2,000 cubic centimeters," Jalal Mirzaei was quoted as saying by Alef news agency.
Cars with engines bigger than 2000 cc will have to buy unsubsidized fuel, he said, but added that nothing has been finalized as “talks are still underway about a reasonable price” for unsubsidized gasoline on which there will be limitations.
Gasoline was rationed and electronic fuel cards were introduced in 2007 to curb consumption and waste. At the time motorists could buy 60 liters of subsidized fuel each month at 7,000 rials (70 cents) per liter and gasoline outside the quota system was sold at a single price of 10,000 rials (30 cents) nationwide (at the time one USD was worth 10,000 rials, today it is 150,000 rials).
The rationing policy ended in 2015.
The lawmaker denied claims that the fuel card system is outdated and needs to be replaced. Morteza Moqadasian, the former managing director of Behsazan Mellat Company, the operator of the electronic fuel card system, says implementing the rationing plan needs $100 million because a large part of the required equipment is outdated and must be replaced with new hardware and software systems.
The system's hardware and software is apparently outdated and need to be renewed in its entirety," he said, adding that 30% of car owners do not have fuel cards.
The director emphasized that so long as the price difference between subsidized and unsubsidized gasoline is not tangible fuel smuggling will not end.
He suggested that a liter of unsubsidized gasoline should be sold at 60,000 rials (40 cents) to be able to discourage the rampant smuggling in the border regions.
Iran has the cheapest gasoline after Venezuela.
It has often been reported that close to 20 million liters of gasoline is smuggled per day. However, this volume of shocking contraband and the obvious inability or unwillingness of those in charge to combat the trend, has so far not been admitted by senior authorities including Oil Minister Bijan Namdar Zanganeh.
The average international price of gasoline is $1.17 per liter, with Norway, Hong Kong and Iceland being above two dollars, as the most expensive places to drive a car.
Traditionally, oil producing countries sell low price gasoline because oil is their only big item they produce. Iran does not have enough refining capacity to meet rapidly growing demand and imports 1/3 of its gasoline needs – enough for almost 350,000 passenger cars.
Whopping Subsidy
Iran's annual gasoline consumption is in the neighborhood of 33 billion liters for which the government pays a whopping 200 trillion rials ($13.5 billion) in subsidies. Economic experts and free-market pundits say this money can help build 66 factories and create jobs for 4 million people.
In 2016 the government spent $14 billion to subsidize oil-based fuels and $18.7b to subsidize electricity and natural gas.
It is generally believed that cheap energy prices have led to waste and inefficiency. Neighboring Turkey with the same population as Iran has a GDP 2.5 times bigger than Iran but uses almost half the energy. Gasoline in Turkey is five times more expensive than in Iran and consumption too is much lower.
Iranians burn 100 million liters of gasoline per day. Per capita gasoline consumption in the country is three times that of China whose population is 18 times larger.
Iran's fuel consumption has increased by 50% compared to 2011 when it was 60 million liters per day.
Environmentalists, economic analysts, auto industry skeptics and strong opponents of command economies blame low quality gas guzzlers churned out by the two main domestic auto giants -- Iran Khodro and Saipa – for the worsening air pollution and creating unacceptably high demand for fuel.
The two companies are semi-state owned and as a matter of routine have always disregarded appeals for accountability and producing quality vehicles to reduce air pollution and curb fuel consumption. The arrogance and ignorance of the senior management of the two carmakers is understandably seen as an insult to the intelligence of consumers and car buyers wanting to buy domestic.
Successive governments have traditionally maintained monopolies in the oil sector and major manufacturing industries including the huge car manufacturing sector.
