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Iranian leader presents bill to cut subsidies

Iranian leader presents bill to cut subsidies

The Iranian president sent Tuesday a sweeping economic package to parliament aimed at scrapping costly subsidies in coming months _ a precarious move since the bill is also likely to stoke Iranian disenchantment in a year when Mahmoud Ahmadinejad is up for re-election.
The bill _ if approved _ is certain to hike prices and fuel inflation, experts have warned.
Ahmadinejad has claimed that plummeting oil prices from $147 a barrel last July to just $40 now have made his plan, which foresees doing away with subsidies for fuel, water and electricity, inevitable.
Iran is already bulking under a 28 percent inflation. That, along with Ahmadinejad's failed election promises to bring oil revenues to every Iranian family, will tax his 2009 re-election bid.
To compensate the cut in subsidies, Ahmadinejad wants the government to pay the needy in cash.
Iran's 290-seat parliament has yet to debate the bill. Lawmaker Kazem Delkhosh said that the legislature is expected to finish deliberations and vote within a month on the package.
Ahmadinejad told the parliament that "collapsing oil prices encourage us to quickly implement the bill. The time has come to make this decision." He added that prices have to reflect reality, and stressed that up to 60 percent of the money saved from cutting subsidies would be allocated to pay low-income families.
Such statements are a sharp turn from Ahmadinejad's practice to sidestep unemployment and inflation figures in remarks on the economy and instead take shots at the United States, which he accuses of exporting financial problems to the rest of the world.
Ahmadinejad recently acknowledged publicly for the first time that the economy of his nation _ the world's fourth largest oil exporter _ has been taking a severe beating from tumbling oil prices.
A supporter of Ahmadinejad's bill, lawmaker Ruhollah Hosseinian, said abolishing subsidies is the remedy for the ailing economy.
"A subsidized economy is an illness Iran is suffering from and we need to remedy this illness," he said.
Legislator Kazem Delkhosh warned that Iran, with a population of 70 million, is consuming energy equal to that of China with a population of 1.1 billion people _ a statement seen as reflecting that the situation was unsustainable.
But lawmaker Emad Hosseini who opposes the bill, said the proposed package "will cause widespread unemployment, bankrupt big industries and reduce the purchasing power of the people."
Iran's major industries are dependent on cheap energy.
Ramin Pashaifam, a central bank official, warned the bill could raise inflation further by between 11 to 15 percent.
Some aspects of the package, such as a sales tax, have been floated in the past. In September, merchants closed their shops to protest a new sales tax, and the unrest forced Ahmadinejad to order the government to temporarily suspend the measure.
Strikes are a concern to Iranian authorities _ a series of merchant strikes helped incite popular unrest that eventually led to the 1979 Islamic revolution.
A populist president, Ahmadinejad was elected in 2005 after promising to bring oil revenues to every family, eradicate poverty and tackle unemployment.
But his popularity plunged as inflation and unemployment rose. Official statistics say Iran's unemployment rate remains at 10 percent, although experts believe it is nearly $30 percent.


Updated : 2021-07-27 05:00 GMT+08:00