Iranian fuel prices led by gasoline surged yesterday as the government of Iranian President Mahmoud Ahmadinejad started to remove subsidies on energy and food as part of a long-awaited economic overhaul.
From yesterday, motorists have to shell out US$0.40 for the monthly quota of 60 liters of gasoline, and US$0.70 for the rest of their purchase of the commodity, a hike of 75 percent, state television announced on its Web site.
The Iranain government plans to phase out subsidies on energy products such as gas, diesel, natural gas, kerosene and electricity and food items such as water and bread.
According to official estimates, subsidies on these products cost state coffers about US$100 billion a year.
The Tehran municipality announced the rise in fuel prices would not lead to hike in fares of public transport such as the metro rail network, buses and taxis plying in the capital, media reports said.
In a late-night interview on state television on Saturday, Ahmadinejad announced the scrapping of subsidies would start to take effect from early yesterday.
“For the moment we do not have plans to free the prices, but the prices will be corrected. New prices will be announced tonight,” he said.
Ahmadinejad has been severely criticized by various groups for the subsidy removal plan, which has been delayed by three months.
Part of Iran’s ruling conservative camp says the plan would further stoke inflation at a time when the economy is already reeling under high price rises and unemployment.
However, the government has toned down the potential impact of the plan and maintains that inflation itself has already fallen to single digits.
Parliament had also tried to delay and limit implementation of the measure by challenging the government’s sole authority to decide on how to distribute among the poor the savings generated from the scrapping of subsidies.
Iranian Supreme Leader Ayatollah Ali Khamenei has backed the plan despite the concern of some conservatives.
Iran previously had two prices for gasoline, with motorists allocated a quota of 60 liters of gasoline per month at a subsidized price of US$0.10 per liter. Beyond this quota, they had to pay US$0.40 a liter.
Soon after Ahmadinejad’s announcement, motorists were seen lining up outside Tehran gas stations to fill up their tanks before the new fuel prices took effect.
Tehran Governor Mortaza Tamaddon urged people “not to gather at gasoline stations as there was no problem to meet the city’s need for gasoline,” state news agency IRNA reported.
On Saturday, however, Iranian authorities gave 50 liters of gas at a price of US$0.10 as an exceptional measure, media reports said.
To offset the rising prices, the government has begun to pay part of the expected savings from subsidy removals in the form of direct aid to the people.
According to official figures, about 60.5 million Iranians have already started to receive 810,000 rials (US$74) paid into bank accounts every two months. This represents US$2.5 billion a month in the state budget.
Ahmadinejad warned foreign media outlets were acting against his subsidy scrapping plan.
“They don’t want Iran to progress and become a model country where there are no poor,” he said.
Iran’s Mehr news agency said the price of jet fuel was now set at US$0.40 per kiloliter for domestic flights and US$0.70 for international flights.
Diesel prices also jumped to US$0.15 from US$0.0165, the state television Web site said.
Iranian government spokesman Mohammad Reza Farzin said the average price of household electricity was now US$0.045 per kilowatt an hour, water US$0.25 per m3 and cooking gas US$0.07 per m3.
“The expenses [for households] will depend on consumption. The lesser the consumption, the lesser the cost will be,” Mehr quoted him as saying.
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