2nd Phase of the Subsidies Law Heralds 25% Hike in Energy Prices
Despite the public criticism of the implementation of the second phase of Iran’s lifting of some subsidies, president Hassan Rouhani recently emphasized that “There was no choice but to implement this second phase.” His first deputy echoed his message and announced that there would a 25 percent hike in the cost of energy. At the same time critics have been raising their voices and airing their concerns.
According to a report by the president’s public relations office, Rouhani told his cabinet members during a recent meeting, “People need to know that there is no alternative to implementing the second phase of the subsidies program, which has been passed into law by the Majlis. This administration intends to implement the law step by step to its end and nothing will impact its execution. I take full responsibility for its implementation.”
As reported by Mehr news agency, Rouhani’s first vice-president Ishaq Jahangiri sent the same message on a trip to the northern province of Mazandaran when he said, “Because of the 40 percent inflation rate, the economy cannot sustain the energy costs and so all prices would increase between 20 to 25 percent, with some items having an even greater hike. The new earnings through these increases would go to meeting the budget shortages and the health sector in the economy. The situation with the health sector is disconcerting. The hospitals that I visited are in disarray and we are amongst the worst countries in the world in this regard.” He continued, “90 billion Toman was earned from higher (government set) prices by 2013 while the government paid out more than 130 billion Toman in subsidies. The future of the energy sector in the country is alarming as demand for energy will be more than what is domestically produced.”
The deputy minister of the economy, Shahpour Mohammadi, also has spoken on the government’s over-expenditures. “Adjustments in (government-set) prices will be gradual. Targeted subsidies will bring greater employment and growth to the economy in the long term as these will result in a more efficient use of resources and will adjust the consumption patterns in the country.
The second phase of the targeted subsidies law plans to increase the government-set price of energy products by 25 percent. Reuters recently reported that Iran has announced plans to increase its imports of gasoline next year. This announcement comes after Iran announced that its petroleum production units had stopped the production of the fuel. An unnamed source in the refinery industry confirmed that Iran would be importing more petroleum next year.
Some Iranian politicians and critics of Rouhani’s administration have expressed concerns over the planned price hikes, which they fear could spark social unrest.