Iran's parliament on Monday moved ahead with a bill to sharply slash energy and food subsidies, approving one article of a draft law that has the potential of stoking major unrest in a country struggling under international sanctions. State radio said the article approved by lawmakers would gradually cut energy subsidies over five years, bringing the heavily discounted fuel prices more in line with international prices.
Officials say the cuts are needed to recoup some of the roughly $90 billion spent yearly by Opec's second largest exporter on subsidies, and to target the funds more directly at helping poorer segments of the population as well as funding infrastructure projects.
Subsidies currently eat up about 30 percent of the government budget at a time when already high spending and the collapse of oil prices last year squeezed the country's economy. ``The plan would prevent an important part of excessive consumption (in Iranian society), as well as injustice in the redistribution of subsidies,' state-run Press TV quoted President Mahmoud Ahmadinejad as saying in a live interview on Iranian television Sunday night.
Parliament had approved the broad outlines of the 17-article bill on Sunday. The government had pitched a plan last year to revise the existing gasoline rationing system, but the proposal was withdrawn amid criticism in parliament. Little was mentioned about it in the run-up to the contested June 12 elections a race in which Ahmadinejad came under fire for economic policies critics say ran the country into the ground. His opponents maintain that massive spending on populist projects that did nothing but deplete the billions of dollars Iran earned as oil rallied to a record $147 per barrel by mid-2008.
A push in 2007 to scrap the fuel subsidy program resulted in widespread outrage, with gasoline stations burned to the ground in protest. The latest proposal could present Ahmadinejad with one of his government's most serious challenges since the violence and protests resulting from the summer's presidential elections that critics and the opposition contend he stole through widespread fraud. Iranians enjoy some of the cheapest gasoline prices in the world.
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