Fuel consumption across Iran
has fallen since the government began scrapping subsidies on energy goods, a
top official said on Monday, adding the economic restructuring has been
generally well received.
"In the first nine days of the launch of the subsidy removal plan, the
energy consumption has fallen," Deputy Economy Minister Mohammad Reza
Farzin told AFP in an interview.
President Mahmoud Ahmadinejad's government began scrapping subsidies on
sensitive energy and food products from December 19 despite much debate and
initial criticism from lawmakers and economists.
As a result, prices of petrol, diesel, cooking gas and electricity and water
skyrocketed by up to five times.
The government plans over a five-year period to completely phase out the
subsidies, which cost the state's coffers about 100 billion dollars annually.
Farzin said that since the plan came into effect the government had seen an
across-the-nation fall in fuel consumption, something it had been wanting to
achieve for years.
"In the past nine days, our petrol consumption which was about 60 million
liters (13.1 million gallons) a day is now at 55 million," he said.
"The oil ministry says that diesel consumption, which was at 54 million
liters, is now at 40 to 41 million liters," he said, adding that cooking
gas consumption had dropped by six percent and water by five percent.
Stabilizing energy consumption has been a key concern of Iran,
the second largest oil producer of OPEC, after steady rises over the past 10
years which Farzin said averaged 6.5 percent annually.
"We are spending 100 billion dollars in subsidies every year from a gross
domestic product of 400 billion dollars. We have realized that low energy
prices cannot deliver social welfare," said the government's point-man on
the subsidy removal plan.
"It can't reduce poverty. We are determined to use the resources for
managing prices more efficiently."
The scheme, now welcomed by lawmakers and economists, faced stiff resistance
initially in the conservative parliament which questioned the government's
ability to distribute the savings earned from it and warned that the plan was
inflationary.
A 2007 attempt by government to ration petrol triggered riots in Tehran with
several gas stations set ablaze by angry mobs.
Farzin dismissed criticism that the plan would fuel inflation at a time when
the economy was facing stiff international sanctions and high levels of
domestic unemployment.
"We are returning the income generated back to the people. We are not creating
more cash. So our plan will not increase inflation," he said defending the
long-awaited overhaul of the economy.
"We do not believe that the money generated should go to government
coffers. On the other hand if we can activate the production sector, it will
help control inflation."
He said a simultaneous plan to push ahead with privatization would help control
inflation as more and more "chunks of (state-owned) industries" are
sold to the private sector.
"The cash that will go from us will help create enough demand for
production," Farzin said, referring to cash handouts the government
started to give to the population before the subsidy plan was launched.
According to official figures, some 60.5 million Iranians are receiving 890,000
rials (around 78 dollars) paid into bank accounts every two months, costing the
government 2.5 billion dollars a month.
Observers say that the price hikes have hit the transport sector significantly,
especially truckers and inter-provincial bus operators.
Farzin said the government had anticipated this multiplier effect and discussed
it with representatives of the business community, trade unions and
transporters.
"Price hikes are being effected in the transport sector in different
provinces but up to a maximum of 15 percent which would also ensure that
inflation remains below this level," he said.
Farzin acknowledged that there were some initial "hiccups" in
implementing the plan, but overall it was receiving the backing of the
population.
"The government and people are cooperating responsibly which has helped
the plan to go well," he said.