The government officially adjusted downward the initial revenue projection from feedstock prices sold to industries in the 2022-23 fiscal budget.
In a letter to the Majlis, published by the semi-official Tasnim News Agency, the government said its revenue would fall short 170 trillion rials ($618m) by cutting natural gas feedstock prices sold to petrochemical, refinery, metal and cement companies.
In the initial projections, the Raisi administration had expected to generate 944 trillion rials ($3.5 billion) from feedstock sales to the key industries.
The government’s change of heart came after budgetary reports exacerbated the deep problems of the stock market, giving rise to a fresh a bout of selloff.
Capital market authorities and observers criticized the budget planners for overreliance on revenue from selling feedstock to partly fix the budget deficit, saying it would harm the profitability of industries.
The price of feedstock for petrochemical companies is the same as the export rate for Iran’s natural gas, which is around 50,000 rials per cubic meter.
The feedstock rate for steel and refinery companies would be 40% of the rate set for petrochemical firms at 20,000 rials per cubic meter. The rate for cement markers was set at 10% of price of petrochemical units or at the most 5,000 rials.
Earlier Majid Eshqi, managing director of the Securities and Exchange Organization, said big listed companies would incur losses if feedstock prices rise.
“Under the 2022-23 feedstock pricing formula, petrochemical producers would face an additional 3,500 trillion rials ($12.7 billion) in energy bills,” Eshqi said.
Earlier the head of the Majlis Economic Commission, Mohammadreza Poorebrahimi, called on the government to incorporate ten new support measures in the next budget to bolster the bourse that has been on a slippery slope since the summer of 2020.
Apart from adjusting feedstock prices, injecting the entire tax income from trading shares into the stock market via the “stabilization fund” and reducing taxes on listed manufacturing companies by 5 percentage points (from the previous 25%) are among the support measures.
Budget for Justice Fund Dropped
To maintain a balance between income and expenses next year, the government decided to cut resources for setting up a new development fund.
The government had originally decided to give 663 trillion rials ($2.4b) for establishing the ‘Progress and Justice Fund’. In the letter to the Majlis, the government said that that allocation needs to be cut by 60% or 400 trillion rials ($1.4b).
Such a fund has no precedent in previous budgets and is an initiative of President Ebrahim Raisi.
Apart from government money, the fund will be financed from income generated by administrative bodies in the provinces, including income from selling government assets and a portion of tax collected in the provinces.
As per the initial plan, the resources of the fund will be deposited with banks and lenders will grant loans up to three times the deposits to private sector projects.
