Blind subsidy system costing economy greatly

TEHRAN, Mar. 06 (MNA) – The heavily subsidized gasoline and its rising consumption are putting the country in a difficult situation both strategically and economically.

Strategically because the country has come under illegal tough sanctions by a deceitful and mad person at the White House, and economically because the country’s oil export is being reduced to almost half due to sanctions.

Despite these cruel sanctions, both the government and parliament are following the failed and costly policy of energy subsidy, especially in regard to gasoline.

Following the devaluation of national currency due to sanctions, the current price of gasoline is very far from its real price and this has led to further smuggling of gasoline and other fuels. 

In submitting the national budget bill to the parliament for the next fiscal year, which starts on March 21, 2019, the government did not propose an increase in gasoline prices. It even did not propose rationing it. 

The special parliamentary committee (talfiq commission), which comes into existence when the national budget is being studied at the parliament, also did not propose an increase in gasoline prices. A majority of parliamentarians also blindly backed the special committee’s decisions when the issue was put for a vote at the parliament on February 23

The special committee and government opposed proposals by the Majlis Research Center to distribute the dividends from a partial release of gasoline prices to those who do not have cars. The committee members said it causes more inflation, which has already increased due to sanctions. They claimed it hurts the poor people. 

Kazem Jalali, the Majlis Research Center director, rightly said gasoline, which is being sold too cheaply, belongs to the entire people and its current price is mostly benefiting car owners. 

Currently, gasoline is being sold at 1000 tomans per liter. However, some say its real price is about 7000 tomans. Whether 7000 tomans or higher or lower, it is being sold at a very low price.

The US dollar is currently 4200 tomans and 12700 tomans at official and street rates, respectively.

Based on the proposal by the Majlis center, 30 liters of gasoline was going to be allocated to every citizen per month. According to the plan, those who used car could buy 30 liters per month at the current price of 1000 tomans per liter, and if they used more, they had to pay more for it. Also, those who did not use gasoline received cash instead. 

However, the proposal was rejected in its entirety by the Majlis. The Majlis did not propose any plan instead. It even did not vote to ration gasoline to partly reduce its ever-increasing consumption and smuggling. 

Even if MPs were against paying direct gasoline subsidy to those citizens who don’t have cars, they could at least allocate 30 liters to every car per month at its current price and exact more money from the buyer above that amount.

They even failed to raise prices and allocate incomes to the production sector.

Mohsen Delaviz, the managing director of the National Company to Improve Energy Efficiency, said in October 2018 that the Oil Ministry is paying 35 million dollars of gasoline subsidy per day.

Delaviz also said between 10-35 million liters of gasoline is trafficked every day. He also said 50 percent of the gasoline subsidy goes to the top three decile groups of the society. 
 
Donya-e Eghtesad, a specialized economic newspaper, has also said the share of each Iranian from gasoline trafficking is about 500 liters per year.

A number of young researchers along with a number of noted economists released a statement on March 2 suggesting that a cutting of “hidden subsidy” is a path to economic justice. They said the gradual release of hidden energy subsidies and distributing its dividends are the most effective way to establish justice.

The more consumption of cheap petrol, which now stands between 86-100 million liters per day, means paying more and more blind subsidy and lowering the budget for economic projects. 

The Majlis Research Center says the government is annually paying 60,000 billion tomans subsidy to gasoline while the cash subsidy that is being paid directly to citizens is less than that.

In the previous round of sanctions against Iran, between the years 2012-2015, the US banned the sale of gasoline to Iran. Analysts say if this time the Trump administration has not banned the sale of gasoline, it is because Iran has become self-sufficient in gasoline production. However, they say if the consumption of gasoline continues to increase at its current pace it may be added to the list of sanctions.

Experience has shown that successive parliaments have been pursuing populist policies more forcefully than administrations when it comes to gasoline prices or fuel prices in general. Now, a great number of sitting parliamentarians are more concerned about being reelected in the coming winter’s elections rather than caring about national resources. They think if gasoline prices go up, their chances of being reelected will be reduced.

For a majority of parliamentarians, national resources come after personal interests. Of course, part of the problem lies with the oversight Guardian Council which disqualifies competent hopefuls for the parliament. If qualified hopefuls who had had knowledge of economy and preferred national interests over personal interests probably the country would have got rid of the trap of the heavily subsidized fuel some years ago.

MP Mohammad Qassim, who represents the Kurdish city of Boukan in the parliament, says the behavior of some MPs are motivated by elections. In an interview with the Arman newspaper published on Sunday, Qassim said the MPs’ disregard for the “views of experts” is damaging.

Qassim says a majority of MPs lack necessary knowledge in making decisions in normal conditions, let alone in difficult situations, an indirect reference to the current situation in which prices have gone up highly and the value of national currency has decreased because of sanctions. “Unfortunately, it should be said that most expert views, which can help reduce people’s problems to some extent, are being ignored (by Majlis representatives),” the lawmaker regretted.

The current gasoline policy is anti-justice. The Majlis Research Center has said statistics by the central bank show that a considerable percentage of the population do not have private cars and therefore they are deprived of such a lavish subsidy.

The country’s economy is partly addicted to oil money, but society’s addiction to cheap fuel, especially gasoline, is worse.

No decision by itself is a panacea for all problems in the energy sector but the current policies cannot continue for long. Finally, they will reach a dead-end. At that time, the people and government should pay a high cost.

MNA/TT

News Code 143167

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