Energy prices in Iran soar as government cuts subsidies

Mahmoud Ahmadinejad announced that the subsidy cuts will take effect starting today, Sunday, and described the plan as the “biggest surgery” to the Iranian economy in the past fifty years.

In a television interview on state television last night, Ahmadinejad announced the long-dreaded implementation of subsidy cuts and a few hours after this announcement, the government issued a statement announcing gas prices would soar from 1000 rials (10 US cents) a litre to 4000 rials. The price of gas over the 60 litres monthly quota given each household is also set at 7000 rials.

Officials have announced that the price rises in energy will not affect the price of public transportation for the time being.

For several years, the Iranian government has been planning to phase out subsidies on energy products and food items in a five-year plan. The subsidies are said to be worth 100 billion dollars a year.

In 2007, the government announcement to ration gasoline triggered riots in Tehran and wary of such outbreaks, heavy police presence is reported in Tehran today.

ILNA also reports rises in electricity, water and natural gas prices. While electricity and water prices almost quadrupled, the price of natural gas is increased almost seven times.

The government says that it will return the money from subsidy cuts to the people through cash payments.

About 74 dollars has been paid out to some 60.5 million Iranians to help them cope with the change. The families are to receive this benefit every two months which translates into 2.5 billion dollars a month in the state’s budget.

The subsidy cuts which have been long time in the making, were especially challenged by the parliament over Ahmadinejad’s insistence on having absolute authority in spending the billions of dollars that it is supposed to add to government coffers.