Iran Committee Rejects Ahmadinejad’s Subsidy Cut Plan, Mehr Says

An Iranian parliamentary committee rejected a plan by Mahmoud Ahmadinejad’s government to further increase the prices of subsidized energy and food, the state-run Mehr news agency reported.

The Parliament’s Integration committee rejected yesterday the size of the cuts proposed by the government, Mehr said. In the draft budget for the Iranian year started March 20, which Ahmadinejad presented to lawmakers in February and is yet to be approved by the parliament, the government’s revenue from subsidy cuts was set at $110 billion compared with some $44 billion the year before, according to the Mehr report.

The committee’s decision means that the government’s plan to introduce the second phase of a subsidies reform plan started it Dec. 2010, may fail to take place in the current Iranian year, the Mehr report published late yesterday said. The five- year plan consists of phasing out energy and food subsidies and replacing them with cash payments to the poor.

The government had sought to introduce the second step of the plan earlier this year and was faced with critics warning of spiraling inflation at a time when Iranians are already grappling with a surge in prices following tightening international sanctions over Iran’s nuclear program.

The committee’s decision needs to be endorsed by a majority of the parliament, Mehr said. The parliament may agree to raise energy prices to some extent, but “far less” than the government had requested, it said.

To contact the reporter on this story: Ladane Nasseri in Dubai at lnasseri@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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