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Iran Moves on Ultra-Cheap Petrol, Starts Rationing

Iran Moves on Ultra-Cheap Petrol, Starts Rationing

Friday, 15 November, 2019 - 14:30
Iranian drivers fill their tanks at a petrol station in the capital Tehran. AFP
Asharq Al-Awsat

Iran imposed petrol rationing and raised pump prices by at least 50 percent Friday, saying the move aims to help the needy with cash handouts and is not due to a budget deficit.

"Increasing petrol prices is to the people's benefit and also to help the society's strata under (economic) pressure," President Hassan Rouhani told a cabinet meeting, quoted by state news agency IRNA.

"No one should imagine that the government has done this because it is economically struggling; not at all, not a rial of this will go to the treasury," he added, AFP reported.

Each driver with a fuel card will now have to pay 15,000 rials (13 US cents) per litre for the first 60 litres of petrol bought each month, said the state-run National Iranian Oil Products Distribution Company.

Each additional litre will be charged at 30,000 rials.

Fuel cards were first introduced in 2007 with a view to reforming the subsidies system and curbing large-scale smuggling.

Iran's economy has been battered ever since US President Donald Trump withdrew from the 2015 nuclear agreement between world powers and Iran and reimposed punishing unilateral sanctions.

The rial has plummeted in value against the US dollar, inflation is now running at more than 40 percent and the International Monetary Fund projects that the troubled economy will contract by nine percent this year and stagnate in 2020.

- 'Under pressure' -

According to Rouhani, currently "75 percent of the country are under pressure" and the extra revenues from the price hike are going to be used to help about 60 million Iranians in need.

Payments will start "within the next week or 10 days", the head of Iran's Planning and Budget Organisation, Mohammad Bagher Nobakht, told state television.

The handouts will range from 550,000 rials ($4.68 based on latest open market prices) for couples to slightly more than 2 million rials ($17.46) for families with five members or more.

Ulta-low petrol prices have led to high consumption, with Iran's 80-million population buying an average of 90 million litres per day, according to IRNA.

They have also fuelled high levels of smuggling -- estimated at around 10 to 20 million litres per day, IRNA said.

Smuggling has intensified due to the rial's drastic drop in value, according to AFP.

Rouhani said in his speech that he had rejected calls by some in government to raise prices to regional levels to prevent smuggling, since it would increase inflation.

Iran's energy consumption is too high and can be countered through "changing the culture and manufacturing good cars", he said.

Efforts to modernise Iran's ageing and highly polluting cars have been hampered by a lack of investment, and foreign companies such as Peugeot and Renault were again forced to withdraw this year by the return of US sanctions.

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