Interior Minister announces elimination of subsidies for top three income deciles

Rahmani Fazli says that by order of the President, the resources from the elimination of the three-tenth subsidy will be spent on development projects in the provinces. Hassan Rouhani had said a day earlier that the subsidy should be paid, but in a “targeted and conditional” manner.

On Thursday afternoon, January 26, at a meeting of the Bushehr Province Resistance Economy Headquarters, Abdolreza Rahmani Fazli, while appreciating the efforts of the provincial executive officials, emphasized that there is still a long way to go to achieve the desired conditions.

According to Tasnim News Agency, the Minister of Interior said at the meeting: "In the economic sphere, the inappropriate, wrong, and outdated economic structure, which was absolute dependence on oil, must be changed, and to a large extent we are witnessing changes, so that many of our businessmen and traders have knowledge and experience, and if conditions are equal, our country will also make significant progress in the economic sphere."

Contrary to this claim and despite US sanctions that have severely reduced Iran's oil and gas exports, the projected revenues for this sector in next year's budget bill are 148 trillion tomans, about 20 trillion tomans more than what was determined in the Islamic Republic's Sixth Development Plan.

The bill, which the twelfth head of state presented to the Islamic Consultative Assembly on Tuesday, envisages that cash subsidies for the top three income deciles of society will be eliminated in 2019.

Three-tenths subsidy for development projects

During a trip to Bushehr, the Interior Minister referred to the request of some officials to delegate more authority to the provinces and said: "One of these cases is the President's order to transfer the subsidy credit for three tenths to the provinces so that the subsidies can be paid in coordination with the people. Therefore, by eliminating the subsidies for three tenths of the society, its credits will be allocated for the implementation of the provinces' development plans."

The 2019 budget bill states: "Governors across the country are authorized, in coordination with the Ministry of Cooperatives, Labor and Social Welfare and based on the Iranian Welfare Database, to eliminate cash subsidies for the top three income deciles. The resources generated from the elimination of cash subsidies for high-income households, with the approval of the provincial Planning and Development Council, will be used to gradually eliminate absolute poverty and also complete the unfinished priority provincial projects of the same province."

Efforts to eliminate high-income subsidy recipients began at the beginning of the 11th government, but have not yielded significant results so far. Gholamali Jafarzadeh Aymanabadi, a Rasht representative and member of the Parliament's Program, Budget, and Accounting Commission, said last year that more than 96 percent of Iranians receive subsidies.

Ali Larijani, the speaker of the parliament, said last Thursday that the total subsidy paid to the people amounts to 900 trillion tomans, more than twice the total budget, but because "the country is not in normal conditions," now is not the right time to cut it.

The cost of paying cash subsidies, which has not changed since 2000, is estimated to be around 42 trillion tomans annually. Larijani apparently means the total subsidies that the government pays in various areas.

The risk of uncertainty in construction projects

President Hassan Rouhani, while repeating the figure of 900 trillion tomans at a cabinet meeting on Wednesday, said: "The government pays very high subsidies in the water, electricity, oil, gasoline, diesel, educational and health services sectors and does not intend to eliminate them."

According to ISNA news agency, Rouhani also said that subsidies should always be paid, but that these subsidies need to be “targeted, conditional, and temporary.” He said the government is trying to either not reduce subsidies to the service sector or to reduce them by a small amount.

Some experts believe that allocating resources from the elimination of the three-tenth subsidy to poverty alleviation and the completion of development projects in the provinces carries the risk that if the government fails in this task, development projects will also remain stagnant and will not be able to play a role in creating jobs and overcoming the economic recession.

Source: DW