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Ahmadinejad may withdraw economic reform bill

MPs say the aim of the economic reform plan will not be realised without parliament's supervision, but the president feels otherwise.

TEHRAN // The government may withdraw its controversial economic reform bill if parliament insists on having direct supervision over the expenditure of money freed up from subsidies currently paid for crucial industries and products.

The Iranian government is now paying about US$100 billion (Dh367bn) in subsidies to the energy sector, for some food items, water, the postal service and rail and air transportation. Under the government's bill, the money freed up from the subsidies would amount to an estimated $10bn to $20bn a year. But politicians are concerned that the aims of the reform plan may not be realised without parliamentary supervision of the distribution of the extra money - known as emancipated subsidy allocations - because of corruption or because the government may spend it in places other than those specified by the reforms.

Mr Ahmadinejad insists that such supervision will not be needed. Tying the issue of the emancipated subsidy allocations to the annual budget law by legislators - which would require the distribution to have parliamentary oversite - will obstruct the implementation of the government plan, Mohammad Reza Farzin, the deputy minister of economy and spokesman for the government economic development working group, was quoted by the pro-government Iran newspaper as saying.

Mr Farzin's remarks echoed the threats of the president, Mahmoud Ahmadinejad, last Tuesday of withdrawing the bill altogether if legislators did not grant full control of the emancipated subsidy allocations to the government. This threat was repeated in a statement released by the president's office the next day but lobbying in parliament has so far prevented the actual withdrawal of the government bill.

On Tuesday, during a meeting with legislators in parliament to discuss the issue, Mr Ahmadinejad accused his opponents of conspiring to sabotage his economic reform plan by forming a special "headquarter", Khabar Online news portal reported yesterday. Legislators have secured themselves the right to supervise the government's allocation of subsidies by including articles in the related law that require the government to put all of the money earmarked for subsidies into a special fund in the state treasury.

The state treasury is audited by a parliament-appointed audit court. Legislators have also reduced the percentage from the emancipated allocations to be distributed to families from the government-proposed 60 per cent to 50 per cent, saying that improvements to the social welfare system compensate for the reduction in direct payments. The government bill prescribed payments only to low-income families, but after heated debates, this was changed so that money would be given to all citizens irrespective of their income.

The annual inflation rate stood at 16.7 per cent in October, and opponents of Mr Ahmadinejad's economic reform plan, such as the reformist legislator Alireza Mahjoub, claim that the figure could rise to as much as 60 per cent after the implementation of the proposed reforms. Legislators have so far given the government freedom to decide the new prices for oil and other commodities and the government is expected to quadruple the oil price, which in its turn can affect the prices of many other commodities.

The amount of emancipated subsidy allocations will depend on several variables, including international and domestic prices for commodities such as petrol and wheat. A precise estimate of the total amount of subsidy compensation to be paid to families is therefore a difficult task. Parliamentarians want the government's pricing of the commodities for which the subsidies are removed to be done in a manner that provides between $10bn and $20bn in revenues for the government in the first year of the implementation of the plan.

Considering the fact that by the decision of the parliament the emancipated subsidy allocations at the disposal of the government will not exceed $20bn, the maximum that each person may expect to receive from the government will not be much more than $20 per month. Most citizens have a vague idea about the amount of the compensation money to be paid to them and how the new situation will affect their lives, while many expect the prices of basic commodities to increase dramatically after the plan is implemented.

"My experience tells me that a small increase or even the expectation of an increase in the price of fuel can shoot up all the other prices," Hasan Karimi, 48, a taxi driver in, said. "The price of things like eggs, meat and chicken and sugar has already increased by at least 10 per cent since last month after a relative stability of prices in the preceding months. I guess this has a lot to do with the expectation of the elimination of subsidies," he said.

"If, as some people say, the government is going to pay only about 200,000 Iranian rials [Dh73] per person as compensation, I seriously think the likes of me will be in deep trouble. This is much less than Mr Ahmadinejad was promising a few months ago before he was re-elected," Mr Karimi said. @Email:msinaiee@thenational.ae