Wednesday, March 10, 2010

Gasoline Price to Increase 300 Percent

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Rooz Online English /

The head of the Majlis Research Center announced the passage of a bill to limit available funds from cutting subsidies, according to which Ahmadinejad’s administration will be given the power to set prices for gasoline and related energy products next year. Speaking to Jame Jam newspaper, Ahmad Tavakkoli said, “In the 1388 (2010) budget bill, the administration had predicted revenues of 34 thousand billion Tomans (about 34 billion USD) from reforming subsides for energy products, mainly gasoline and diesel fuel. However, studies conducted by the Research Center, economic experts as well as discussions in the budget committee revealed that the expenditure of this revenue would result in an extreme increase in the price of such products and, consequently, uncontrollable inflation.” He added, “The administration’s recommendation set the price of gasoline at 400 Tomans diesel fuel at 350 Tomans (35 cents), white oil at 350 Tomans, unrefined oil at 200 Tomans (20 cents), gas at 130 Tomans (13 cents) and electricity at 100 Tomans (10 cent).” According to Ahmad Tavakoli’s announcement, the price of diesel fuel was thus set to increase about 2000 percent, gasoline about 300 percent, natural gas about 980 percent, and electricity about 500 percent. He noted, “In order to reduce the inflationary pressure of the subsidies reform plan, the budget committee decided to limit the government’s revenues from the plan to effectively lead the government towards a gradual and step-by-step removal of subsides and limit price increases to a less steep curve.”

Although the administration claimed that it would strictly adhere to the budget’s gasoline import quota at the beginning of the year, in reality it did not implement the budget bill. According to last year’s Majlis bill, gasoline quotas for privately-owned vehicles were set at about an average of 65 liters per month and capped at 780 liters per year. Each privately-owned vehicle was to be provided 100 liters per month quota for the first three months, followed by 50 liters per month for the remaining nine months. Ahmadinejad’provision of a 300-liter quota for spring was essentially part of his campaign financing, provided to consumers in furtherance of Ahmadinejad’s populist policies. The budget bill required that the quota be reduced to 50 liters per month for the final nine months of the year. The post-election unrest, however, coupled with the Qods Day events and the crisis resulting from the reopening of universities prompted the government to once again depart from the budget bill by increasing the 50-liter quota to 100 liters per month in order to prevent further unrest. In this connection, it is heard that the oil minister has absolved himself of responsibility regarding the rationing schedule, noting that the Supreme National Security Council and the president’s direct representatives ruled on such issues, and that the oil ministry has no involvement in devising the rationing schedules.