Iranian President Mahmoud Ahmadinejad has rejected parliament's subsidies law, demanding double the cuts in food and fuel supports.
His rebuke of parliament, dominated by his erstwhile conservative allies, was tacitly supported by the country's Supreme Leader Ayatollah Ali Khamenei, who has the final say on all state matters.
On Monday, Khamenei urged parliament to work with the government so that the law can be implemented.
The parliament approved $20 billion in cuts, or just half what demanded by Ahmadinejad's government.
Lawmakers fear the full $40 billion in cuts would have result in a 50 percent surge in inflation.
Subsidies consume about 30 percent of the government's budget.