Iran to Replace Subsidies with Direct Cash Handouts

A015920019.jpgTEHRAN (FNA)- The Iranian government has drawn up plans to abolish costly subsidies on fuel and water prices but will compensate people with cash payments.

Under the bill, subsidies will be removed over the next three years on goods such as water, petrol, diesel, kerosene and liquefied petroleum gas, the Sarmayeh newspaper said.

To offset the higher prices of such vital supplies, direct cash payments will be made to Iranians, it said.

The bill has yet to be approved by parliament but some MPs have already warned it could add to the problem of inflation.

Direct and indirect subsidies for goods in Iran amount to as much as 100 billion dollars a year, the government’s planning body said, according to Sarmayeh.

The price of fuels will rise to the level of prices charged in nearby Persian Gulf countries, the newspaper said, without giving an indication how big the rises might be.

The project aims to eventually end the subsidies.

Iranian President Mahmoud Ahmadinejad has been pushing for the switching of subsidies to cash in a bid to “spread economic justice” among different strata of society.

The president has previously proposed a cash handout of between 450,000 rials and 700,000 rials (around 45 and 70 dollars) per person for the 70 percent of the 71-million nation that are classified as mid- and low-income class.

This would equal 60 percent of the total annual subsidy.

In the 2005 election campaign, Ahmadinejad vowed to make the poor benefit from Iran’s oil wealth.

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