Iran cuts portion of gasoline subsidies

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Associated Press

Posted on April 25, 2014 at 8:02 AM

Updated Friday, Apr 25 at 9:05 AM

TEHRAN, Iran (AP) — Iran cut a portion of fuel subsidies Friday, nearly doubling some prices at the pump as part of a second round of cuts delayed since 2012.

The dramatic measure, which went into effect at midnight, will test public support for moderate President Hassan Rouhani in a nation battered by inflation and economic sanctions imposed over Iran's contested nuclear program.

Subsidies have kept the cost of gasoline artificially low for consumers in OPEC-member Iran, and were blamed for making petrol cheaper than bottled mineral water. The slash aims to release government money for production and infrastructural projects in order to improve efficiency and bolster the economy.

Under the new pricing scheme, each car on the road would see its monthly, 60-liter (15.85-gallon) reduced-cost allowance jump to 7,000 rials (22 cents) per liter from 4,000 rials (12 cents).

That works out to about 83 cents a gallon under the new pricing structure, compared to 45 cents under the former. Every liter after that will cost 10,000 rials (31 cents), up from 7,000 rials. That's a rise of $1.17 a gallon from 83 cents a gallon. Taxi drivers have a higher monthly ration of 500 liters (132.09 gallons).

But unlike the 2007 rioting at gas stations, when fuel rationing was imposed for the first time, no violence or protests were reported by midday Friday, though police were put on alert.

The measure had been expected for weeks, yet many Iranians rushed to gas stations in the countdown to midnight to fill up their tanks.

"We have made preparations in the past two months to implement the second phase of smart subsidies plan," Interior Minister Abdolreza Rahmani Fazli told the official IRNA news agency Thursday.

On Friday, the reaction on the streets was mostly muted, and several Tehran residents seemed resigned to the measure.

Taxi driver Ali Mahmoudi, 42, said the government should cut subsidies for private cars, not taxis. "As taxi drivers, we give services to the people, we should get fuel at subsidized prices," he said. "The government should cut subsidies for private cars, not taxis. We rarely can make ends meet."

Abbas Hosseinpour, a trader, said Iranians need to change the way they consume fuel.

"Many of the young drive cars for pleasure, others drive without anyone else in the car, and many don't want to use the public transport system. This needs to change," he said.

Iranians consume some 70 million liters (18.49 million gallons) of gasoline per day, a tenth of which is estimated to come from imports because of Iran's lack of refining capacity.

Under Rouhani's predecessor, Mahmoud Ahmadinejad, the government first began cutting energy and food subsidies in 2010 to help the ailing economy as it faced increased international pressures over the nuclear program.

The second phase, which involved further gasoline subsidy cuts, was initially to take effect in March 2012 but was pushed back over fears of stoking uncontrolled inflation.

Rouhani was elected last June on a pledge to revive the economy, stabilize the national currency and halt inflation.

To compensate price hikes and avoid public protests, authorities have been paying monthly cash handouts. Rouhani's government invited the poorest Iranians to register whether they need to receive a 455,000 rials ($14) cash assistance per person a month. However, only about 2.5 million Iranians — out of the 77 million-strong population — voluntarily said they don't need it.

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