Iran's fossil-fuel subsidy was higher than any other country in 2009 at $66 billion, the International Energy Agency said Tuesday, creating strain on the country's economy and inefficiencies in its energy sector.
Iran
's
fossil-fuel subsidy was higher than any other country in 2009 at $66 billion,
the International Energy Agency said Tuesday, creating strain on the country's
economy and inefficiencies in its energy sector.
In its World Energy Outlook report, the IEA recognized
Iran
's
recent efforts to address the problems created by the subsidies, but noted many
challenges remain before changes are implemented.
"The chronic under-pricing of domestic energy in
Iran
represents a large subsidy that burdens the economy and contributes to deep
inefficiencies in the energy sector," the agency said.
In its fifth Five-Year Development plan, covering 2010-2015,
Iran
hopes
to overhaul its energy subsidy policy with the gradual implementation of
market-based energy pricing and the replacement of subsidies with targeted
assistance to lower-income groups.
Iran's aim is to raise the price of gasoline, diesel, kerosene, liquefied
petroleum gas and other oil derivatives to at least 90% of the Persian Gulf
export free-on board price, elevate gas tariffs for households to 75% of the
Persian Gulf export price--with preferential rates being applied to industrial
consumers--and determine average electricity prices based on the full cost of
production.
The Iranian government expects to redistribute 50% of fiscal benefits resulting
from the subsidy cuts through either direct cash or non-cash compensation for
low-income groups, the agency noted.
Despite Iran's ambitious reform plans, however, details such as the level and
frequency of price adjustments each year, the definition of those eligible for
compensation and the amount and duration of those payments, as well as ways to
minimize inflation, remain unclear, making implementation of reforms
challenging, the IEA said.
With energy subsidies in
Iran
at
the rate of 89%, consumers there paid only 11% of the competitive market price
for energy products, the agency said.
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