Privatization of power plants has not been compatible with Article 44 of the Islamic Republic Constitution based on which a large part of executive responsibilities of the Energy Ministry ought to be transferred to the private sector, a deputy manager at Iran Power Generation, Distribution and Transmission Company (Tavanir) said.
"Transferring power plants to the Social Security Organization, Bonyad Shahid (Foundation of Martyrs and Veterans Affairs) and banks with the aim of settling Energy Ministry does not mean privatization," Ali Asghar Esmaelnia was quoted as saying by IRNA.
The key ministry has privatized over 50% power plants in the past few years and more privatizations are in the pipeline once the Privatization Organization completes value assessment of the listed plants.
"The process was undertaken with the intention of helping the energy sector reduce its mounting debt. In fact it has doubled its financial burden," he complained.
Given the mountain of debt, the ministry did not gain anything, he added, and noted that selling power plants to state organizations would never create the conditions for private sector growth and expansion.
Energy Ministry debt now exceeds $4 billion not only due to incorrect privatization policies but also because of disparities between real electricity prices, which include the cost for generation and transmission, and what the people actually pay
Esmaeelnia said when the power plants were transferred to the "ostensibly private sector", the plants were sinking in red ink, so buyers agreed to buy them on the key condition that the ministry itself clear their debts.
“The Energy Ministry debt now exceeds $4 billion not only due to incorrect privatization policies but also because of disparities between real electricity prices, which include the cost for generation and transmission, and what the people actually pay.”
Generating each kilowatt-hour of electricity costs 887 rials (about 0.088 cents) while it is sold for 680 rials (about 0.068 cents). "The government should have paid the difference to Tavanir, but ….!"
The official went on to say that as per a government ruling in 2016, the Energy Ministry was exempt from paying its share of $1 billion per annum to the Targeted Subsidies Organization to enable it settle the whopping $4 billion of unpaid debt to private contractors. “But the ministry was compelled to pay $110 million to TSO in 2018.”
The controversial Subsidy Reform Plan, launched in 2010 by former president Mahmoud Ahmadinejad, got rid of heavy food and energy subsidies. Instead his government paid 450,000 rials ($13 at time, now hardly worth $4) to every Iranian on a monthly basis.
