An Example of How Subsidies Were Financed During Ahmadinejad’s Term

The method of financing cash subsidies since the beginning of implementing this plan has faced many ambiguities and criticisms. The Ahmadinejad government has been accused of resorting to illegal measures with destructive consequences to pay subsidies.

According to Article 7 of the Subsidy Targeting Law, the government is permitted to pay up to 50 percent of the net revenue resulting from the implementation of this law as cash and non-cash subsidies to citizens.

The revenues envisioned in this law were supposed to come from eliminating energy carrier subsidies and other subsidies, including water, sewage, and some basic food items.

Since the final days of autumn in 2010 when Mahmoud Ahmadinejad’s government began implementing the Subsidy Targeting Law, the total revenue from this law has never been sufficient to pay subsidies.

This is while half of the revenue from this plan should have been allocated to health sectors, support for domestic production and job creation, improvement of public transportation infrastructure, and social support programs.

Paying Subsidies with Money from the Sale of Hormozgan Steel

Mahdi Karbasian, Deputy Minister of Industry, Mines and Trade and Chief Executive of the Organization for Development, Renovation and Modernization of Iranian Mines and Mining Industries (IMIDRO), in a discussion with Shargh newspaper, describes an example of financial indiscipline in the previous government whose negative effects are still evident in the condition of industries and banks.

He says that in 2010, Hormozgan Steel was sold to Mobarakeh Steel for 1,300 billion tomans, but 800 billion tomans of it was “withdrawn by phone, order, and pressure” from the account designated by IMIDRO and went elsewhere.

Karbasian said this pressure came from the Minister of Industry and Mines at the time (Ali Akbar Mohtaj) and from above him (Mahmoud Ahmadinejad), who ordered that this 800 billion tomans be deposited into the government account to compensate for the cash subsidy budget deficit.

The Deputy Minister of Industry emphasized that it was originally supposed that the money from the sale of Hormozgan Steel would be spent on seven steel projects and other projects, but apart from the money deposited into the government account, the remaining 570 billion tomans was placed under a committee in the Ministry of Industry, Mines and Trade instead of being invested in IMIDRO’s projects.

Dividing Money Among Special Individuals

According to Karbasian, this committee, which was under the supervision of the Minister of Industry at the time, was supposed to divide the amount at its disposal through Bank Melli in the form of support for production among various productive companies across the country.

In principle, support for domestic producers should have been provided from the revenues of the Subsidy Targeting Law, but the government carried out this task with IMIDRO’s money in a harmful manner.

Shargh newspaper reported on Thursday, September 23, quoting the Deputy Minister of Industry: “In my opinion, the distribution of facilities at zero interest rate means that a substantial rent has been created for a number of special individuals, and there must have certainly been corruption behind it.”

These facilities were supposed to be recovered after one year and returned to IMIDRO’s account, and Bank Melli was responsible for distributing these funds.

Karbasian says that through IMIDRO’s efforts and with the help of the management of Bank Melli and its branches, 170 billion tomans of this money has been returned over the past two years, but the status of 400 billion tomans of it remains unclear.

A Blow to Banks and Domestic Production

The previous government’s seizure of IMIDRO’s financial resources to pay subsidies took place during Mahmoudreza Khavari’s management at Bank Melli.

Khavari is one of the defendants in the embezzlement case of three thousand billion tomans, and resigned from his position in September 2011 under the pretext of “acute neurological problems and chronic illness” and fled to Canada.

In this case, several senior managers of Mahmoud Ahmadinejad’s government were also mentioned, but the real extent of government members’ involvement has not yet been fully revealed.

According to Shargh newspaper, another illegal measure by the tenth government to cover the subsidy budget deficit is “night withdrawals from banks’ accounts” by the Central Bank, which was carried out on Ahmadinejad’s direct orders.

According to this report, these withdrawals and “manipulations that occurred in the country’s banking system on the orders of the ninth and tenth governments’ officials” are among the most important causes of increased bank arrears and shortage of bank liquidity, which has created problems for them in providing facilities to production units.

Source: DW