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Iranian official rules out commodity prices hike

29 May 2015 13:01 (UTC+04:00)
Iranian official rules out commodity prices hike

By Sara Rajabova

A senior Iranian official has ruled out the possibility that recent fuel prices rise could trigger an increase in commodity prices.

Mohammad Baqer Nobakht, Iran’s vice president for planning and strategic supervision said the recent rise in fuel prices will not lead to an increase in commodity prices.

This came as Iran raised its fuel prices by 40 percent on May 25, and scrapped an eight-year-old rationing program for private motorists as President Hassan Rouhani’s government seeks to shore up public finances.

However, analysts say the government has been forced to increase fuel prices to offset plunging oil prices.

Nobakht said the decision would increase government’s revenues by $1 billion (based on official $exchange rate), Fars news agency reported.

He added that $110 million has been paid in subsidies to the production sector over the past two months.

“This is a 5-year law which was ratified in 2010. We were obliged to implement the law. The law stipulates that the government can earn $11 billion by freeing up fuel prices, half of which should be paid in cash subsidies to the people, 30 percent should be paid to the production sector, and 20 percent should be in the hands of the government,” Nobakht explained.

The current year’s budget law allowed the government to increase revenues to $17 billion, but the president did not approve this decision, he said.

Nobakht stressed that his country is under the pressure of sanctions and that the government’s revenues have fallen sharply. Therefore, the government should restrict the irregular consumption of fuel in order to curb imports.

The government last raised fuel prices last April as part of its plans to gradually scrap fuel subsidies.

Car fuel in Iran is among the cheapest in the world. The latest slashes in fuel and energy subsidies are meant to allocate government money to other sectors in production and infrastructure.

Iranians burn less than 70 million liters of gasoline a day, of which five million liters is imported.

Gasoline rationing was a legacy of former President Mahmoud Ahmadinejad, who introduced the plan in 2007 to cut consumption of subsidized fuel and limit smuggling to neighboring countries. At the time, Iran spent some $5 billion a year to import gasoline.

Three years later, Ahmadinejad started phasing-out food and energy subsidies, replacing them with monthly cash handouts to almost every Iranian.

Rouhani’s government is attempting to restrict handouts to the nation’s poorest by eliminating those deemed less needy.

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Sara Rajabova is AzerNews’ staff journalist, follow her on Twitter: @SaraRajabova

Follow us on Twitter @AzerNewsAz

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