Iran needs to postpone until September a plan scheduled for implementation this month to ration petrol that is expected to have a huge impact on the economy, a prominent MP said on Monday. Head of the Iranian parliament’s Energy Commission Kamal Daneshyar said that the plan, aimed at reducing the lavish subsidies that keep petrol prices low, should be put off as the technology to enforce the rationing is not ready.
“Based on the studies of our commission the ground is not ready to implement the rationing using smart cards, so we have to give another chance to the government,” said Daneshyar.
“We have received reports that the devices for reading the smart cards break down quickly and some pumps end up working backwards. This means that instead of pumping petrol they suck up the petrol from the vehicles,” he added.
“Therefore until these problems are addressed, the rationing project has to be postponed until around end of September,” he concluded.
The lavish consumption by Iranian drivers, encouraged by the subsidized prices that work out less than a comparable amount of mineral water, forces OPEC’s number two producer to import blns of dollars of extra petrol annually.
The government has yet to confirm whether the plan will be delayed but after such explicit comments by the head of the commission that drafted the legislation it appears unlikely the plan can go ahead on time.
There is a consensus in Iran that this colossal burden on the budget cannot continue but the government is aware that Iranians have become very used over the years to cheap petrol.
Economists have also warned that the rises in petrol prices could further stoke inflation in Iran, which is already a source of concern to the government and is estimated by parliament at over 20%.
Tehran has been abuzz with talk about the change with advertisements in newspapers and television urging people to obtain the smart cards to buy their petrol.
The liberal use of the motor car encouraged by the cheap prices has also caused some of the region’s worst traffic congestion in Tehran where motorists can be caught up in snarls for hours on end.
However Iranian Deputy Oil Minister Mohammad Reza Nematzadeh denied that the government was looking for a way out of the plan, saying that the blns spent on petrol imports meant the move was overdue.
“In addition to the 44.5 mln liters of petrol produced in Iran, last year we imported five bln dollars of gasoline. If the rationing is not implemented this year we are faced with importing 9.5 bln dollars worth of petrol.”
He said that in the last Iranian year ending March 2007, 74 mln liters of petrol was consumed per day and the government expected this figure to rise to around 81 mln liters per day.
Under the plan approved by the Iranian parliament in early March, Iranian motorists will have to pay a higher price for any petrol they buy above a certain rationed quota.
The quota has yet to be defined by the government.