Legislators Express Deep Concerns over Subsidy Elimination Plan
by MUHAMMAD SAHIMI in Los Angeles
20 Dec 2010 18:04
[ dispatch] Majles deputies are worried about the economic, social, and political effects of the sudden huge increases in the price of many basic commodities. On Sunday, there was a meeting between the Majles deputies and four members of the administration of President Mahmoud Ahmadinejad: Economy Minister Shamseddin Hosseini; his deputy Mohammad Reza Farzin, chief spokesman for the subsidy cut program, officially the Economic Overhaul Plan; Behrouz Moradi, chairman of the Subsidy Policy Reform Organization; and Vice President for Parliamentary Affairs Mohammad Reza Mir Tajeddini. The meeting was not open to the public. According to Reformist Deputy Mohammad Reza Tabesh, the Majles is worried about the situation. The deputies asked many questions, but were not convinced by the responses of the administration representatives.
According to the plan, all the subsidies for gasoline, fuel oil, natural gas, electricity, water, wheat (bread), sugar, cooking oil, milk, and rice will be eliminated over a five-year period, and the respective prices will be set by the going rates in the Persian Gulf region. The government is supposed to deposit $40 in the bank account of each Iranian every month, which represents roughly half of the savings that the government expects from the subsidy cuts. The government has announced that it is dispatching 37,000 agents to explain to the people the reasons for the elimination of the subsidies and the long-term positive effects of the plan.
The Research Center of the Majles has rejected the administration's claim that the rich are responsible for 70 percent of energy consumption, while the rest of the population is responsible for only 30 percent. The research by the Majles indicates the opposite. For example, most of the gasoline is consumed by the poor and middle class.
Ezatollah Yousefian Molla, a Majles deputy from Amol, suggested that those who take advantage of the situation and try to amass wealth at people's expense should be harshly punished, even hanged. The Ministry of Commerce has announced that those who have raised the prices of their products have 48 hours to lower them, after which they will be subject to prosecution.
Ahmadinejad has said that to prevent abuse of the subsidy cuts, the government does not announce their exact dates. In the Sunday meeting with his administration's representatives, the Majles deputies said that they agree with the decision not to announce the timing of further reductions in the subsidies and increases in the price of essential commodities.
But it appears that the tactic of nonannouncement has been ineffective, and the government is thus using the threat of prosecution to rein back increases in commodity prices. The threat tactic has been used in Iran both before and after the 1979 Revolution, but it has never been effective. Indeed, Reza Farzin himself has said in the past that the prices of commodities cannot be controlled by intimidation and prosecution.
At the same time, the huge increase in the price of energy and fuel may bankrupt many businesses, especially smaller ones, and lead to a dramatic rise in unemployment. Fear of such an outcome has prompted the government to declared its willingness to assist key industries in weathering the storm for now. It has identified 7,000 industrial plants likely to require help in avoiding bankruptcy.
For a table of the former and new prices of a variety of fossil fuels, see here. Reports indicate that the price of bread has at least doubled.
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