Iran Plans Fuel Subsidies Cut on Path to Phase-out

TEHRAN (FNA)- Iran plans to gradually cut from the next Iranian year the amount of heavily-subsidized gasoline motorists can buy and completely eliminate subsidies by 2011, an Iranian official said in comments published on Tuesday.

“We should go towards making the prices real and eliminate the subsidies,” Mohammad Rouyanian, head of Iran’s fuel management and transportation headquarters, was quoted as saying by the Aftab daily. Other newspapers carried similar reports.

Iran is the world’s fourth-largest exporter of crude, but lacks enough refining capacity to meet domestic gasoline needs, forcing it to imports large amounts which it then sells at subsidized prices, burdening the budget.

To curb soaring consumption, it launched rationing of subsidized gasoline in June last year, allowing motorists to only buy 100 liters per month at the price of 1,000 rials (around S$0.16) per liter.

The allocated amount was later increased to 120 liters per month after many drivers complained. Purchases above this limit cost four times more.

“Concerning the government’s policies of ending fuel subsidies by 2011, from next year the gasoline allocation for private cars will gradually be decreased,” Rouyanian said, referring to the 2009-10 Iranian year starting in March.

In related development, Iran Tuesday appointed Noureddin Shahnazizadeh as the new deputy oil minister to replace Mohammad Reza Nematzadeh.

Nematzadeh had been in charge of the National Iranian Oil Refining and Distribution Company for three years. As such, he was responsible for overseeing the country’s gasoline rationing.

“The change is part of a general policy of Mr. Ahmadinejad to hire new and young faces to prevent the widening gap between old and young managers,” said Kamal Daneshyar, former leader of Iran’s parliamentary energy committee.

Shahnazizadeh was the managing director of the Oil Distribution Company.

Nouredin Shahnazi-Zadeh, the new deputy minister, has acquired a high profile in the oil sector by running two big oil refineries in the southern cities of Bandar Abbas and Isfahan.

Nematzadeh has been appointed as Iranian Oil Minister Gholam Hossein Nozari’s top adviser.

Rationing appears to have had little impact on the numbers of vehicles on the streets, but oil officials say that consumption would have increased by 20m liters per day without such restrictions.

The government is seeking to increase its refining capacity.