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Iran fuel prices soar as subsidies scrapped

Removal of subsidies on food and energy led to a hike in the prices of oil, but that won't affect public transportation prices

AFP, Sunday 19 Dec 2010
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Iranian fuel prices led by petrol surged on Sunday as the government of President Mahmoud Ahmadinejad started to remove subsidies on energy and food as part of a long-awaited economic overhaul.
From Sunday, motorists have to shell out 40 US cents for the monthly quota of 60 litres of petrol, and 70 cents for the rest of their purchase of the commodity, a hike of 75 percent, state television announced on its website. Iran previously had two prices for petrol, with motorists allocated a quota of 60 litres (16 gallons) of petrol per month at a subsidised price of 10 US cents per litre. Beyond this quota, they had to pay 40 cents a litre. Iran's Mehr news agency said the price of jet fuel was now set at 40 cents per kilolitre for domestic flights and 70 cents for international flights. Diesel prices also jumped to 0.15 cents from 0.0165 cents, the state television website said.

Government spokesman Mohammad Reza Farzin said the average price of household electricity was now 0.045 cents per kilowatt an hour, water 0.25 per cubic metre and cooking gas 0.070 cents per cubic metre.
"The expenses (for households) will depend on consumption. The lesser the consumption, the lesser the cost will be," Mehr quoted him as saying.
The Tehran municipality announced the rise in fuel prices would not lead to hike in fares of public transport such as the metro rail network, buses and taxis plying in the capital, media reports said. In a late-night interview on state television Saturday, Ahmadinejad announced the scrapping of subsidies would start to take effect from early Sunday.


"For the moment we do not have plans to free the prices, but the prices will be corrected. New prices will be announced tonight," he said.
The government plans to phase out subsidies on energy products such as petrol, diesel, gas, kerosene and electricity, and food items such as water and bread.
According to official estimates, subsidies on these products cost state coffers around 100 billion dollars a year.
Soon after Ahmadinejad's announcement, motorists were seen queueing outside Tehran petrol stations to fill up their tanks before the new fuel prices took effect.
Tehran governor Mortaza Tamaddon urged people "not to gather at petrol stations as there was no problem to meet the city's need for petrol," state news agency IRNA reported.
On Saturday, however, Iranian authorities gave 50 litres of petrol at a price of 10 cents as an exceptional measure, media reports said.
Ahmadinejad has been severely criticised by various groups for the subsidy removal plan which has been delayed by three months.
Part of Iran's ruling conservative camp says the plan would further stoke inflation at a time when the economy is already reeling under high price rises and unemployment.
But the government has toned down the potential impact of the plan and maintains that inflation itself has already fallen to single digits.
Parliament had also tried to delay and limit implementation of the measure by challenging the government's sole authority to decide on how to distribute among the poor the savings generated from the scrapping of subsidies.
The Islamic republic's supreme leader, Ayatollah Ali Khamenei, has backed the plan despite the concerns of some conservatives.
To offset the rising prices, the government has begun to pay part of the expected savings from subsidy removals in the form of direct aid to the people.
According to official figures, some 60.5 million Iranians have already started to receive 810,000 rials (74 dollars) paid into bank accounts every two months. This represents 2.5 billion dollars a month in the state budget.
Ahmadinejad warned foreign media outlets were acting against his subsidy scrapping plan. "They don't want Iran to progress and become a model country where there are no poor," the hardliner saidIran fuel prices soar as subsidies scrapped

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