* Move is blow to govt attempts to cut spending
* Govt needs parliament’s approval for new budget
* Budget squeezed by sanctions, lower oil revenues
By Marcus George
DUBAI, May 6 (Reuters) – A committee of Iranian lawmakers
has rejected a government plan to increase prices for subsidised
food and fuel in a move that threatens to derail a drive to rein
in the country’s sanctions-squeezed budget, Iranian media
reported late on Saturday.
International sanctions imposed over Iran’s nuclear
programme have sharply reduced the amount of money Tehran earns
from oil, upping pressure on President Mahmoud Ahmadinejad to
push through cuts in government spending worth tens of billions
of dollars by scaling back subsidies for the population.
But a parliamentary committee examining this year’s budget –
which the overall parliament has yet to approve – rejected the
size of the proposed cuts, setting the stage for a possible
compromise deal that may force the government to sign up to far
less ambitious cost-savings.
“The Majlis (parliament) may agree to raise energy prices to
some extent, but far less than the administration has
requested,” the parliament’s Integration Committee said,
according to the Mehr News agency.
The committee approved just 560 trillion Rials for the
programme (around 44 billion dollars), less than half the amount
the government wanted to add to its coffers thanks to subsidy
savings, parliament’s news agency reported.
That is the same amount allotted in 2011 and 50 billion
dollars less than the government wanted.
The government implemented the first-stage of its Targeted
Subsidies Plan towards the end of 2010 in an attempt to wean the
country off more generous food and fuel subsidies. At the time,
Ahmadinejad called it the “biggest economic plan of the past 50
years”.
But the next phase of the plan needs the parliament’s
approval before it can be implemented at a time when the makeup
of parliament appears to be changing in favour of Ahmadinejad’s
conservative critics.
Prices have spiralled since the reforms were first
introduced, causing serious financial problems for millions of
people across the country. The price of petrol has risen
three-fold and the cost of gas has soared by 500 percent.
Critics of the plan have accused Ahmadinejad of pushing
through a programme of wasteful public spending that has caused
soaring inflation and of using the reforms for his own political
gain.
UNDER PRESSURE
The parliamentary speaker Ali Larijani – a fierce critic of
the president – said the government was now planning to triple
petrol prices and to double the cost of natural gas, Mehr news
reported on Friday.
Last month, the government said it would boost the monthly
cash payments it gives to its poorest citizens to offset the
rising prices by more than 50 percent to 730,000 Rials (around
60 U.S. dollars).
Ahmadinejad wanted to introduce the second phase of his
subsidy reform programme last month but hostile MPs say the
additional payments have not been approved and are illegal.
In a New Year speech, Ayatollah Ali Khamenei gave his
backing to the reforms which he said were an important means of
distributing welfare in a more balanced way.
The International Monetary Fund has commended the Iranian
government for the policy which it said had led to a reduction
in fuel consumption and inflationary pressure.
The reforms coincide with tightening external pressure on
Iran’s economy caused by harsher sanctions imposed by the United
States and its allies early this year.
The embargoes target Iran’s banking and energy sectors and
have resulted in a dramatic devaluation of the Rial since
January.
(Reporting By Marcus George; Editing by Andrew Osborn)
