By M.A. Saki

Unwise and huge subsidy for an unnecessary thing 

October 16, 2019

Continuing to greatly subsidize gasoline is detrimental to economy at the cost of national resources and clean air.

Though return of illegal sanctions and a sudden change in prices have made any decision to at least partially free up gasoline prices more difficult, the current situation is not tenable. 

The rising consumption of gasoline, which has hit 100 million liters per day, is alarming. Simply speaking, subsidy for gasoline is neither wise nor expedient.

The chief reason behind the current situation surrounding gasoline price is a mix of advices by the so-called economic experts and populist policies by the successive parliaments and governments in varying degrees.

Opponents have always been arguing that freeing gasoline prices, even gradually, will hurt low-income and poor classes. However, the main motive by some parliamentarians and presidents in opposing a rise in gasoline prices has been to get reelected.

In fact, it is the rich classes which have been profiting more from subsidized fuel, especially gasoline. Some poor classes even do not have a car to benefit from this subsidy.

In a story on its website on October 6, the ISNA news agency said studies show that the rich’s share from gasoline subsidy is 23 times more than other classes of the society.  

According to officials from the Budget and Planning Organization in the last calendar year (March 2018-March 2019), about 600,000,000,000,000 tomans ($140 billion and $52 billion based the official and unofficial rate dollar of 4,200 tomans and 11,400 tomans respectively) subsidy was spent for electricity, water, and oil products; however, more than a third of the figure was spent on gasoline.

According to the report, even the rich classes’ benefit from electricity subsidy is 3.6 times more than others.  

There may be justification for subsidizing water and electricity but not for gasoline. No wise mind accepts this. 

This mindset by the public that Iran sits on large reserves of oil and gas and there is no need to sell them at their real price must be rectified. Future generations also have a share from these natural resources.

In a press conference on Monday, President Rouhani, though too late, acknowledged that the current price for gasoline, which is 1,000 tomans per liter, is “unfair”. After more than six years of his presidency, the gasoline price has just increased 300 tomans.

Labor and Social Welfare Minister Mohammad Shariatmadari has said that even a government manager has protested that why his cash subsidy, which is just 45,500 tomans, has been cut. Government spokesman Ali Rabiei has also said those who complain about the cut of their cash subsidy mostly live in rich neighborhoods in northern Tehran.

This huge sum of gasoline subsidy, which is over 550 billion tomans per day, must be used for projects which are of high priority. It must be used for developing public transport, education, environment, water conservation, designing and manufacturing electric cars, research projects, etc.

Not only it is not advisable to subsidize gasoline, its consumption should also be a subject for tax. This approach is the only solution to cut down its consumption, counter air pollution and motivate knowledge-based enterprises, not the current companies which act like a mafia, to develop energy efficient cars, including electric ones.

However, the more delays by the parliament and government to reform gasoline prices, the more painful its costs will be. 

PA/PA

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