TEHRAN (Dispatches) — The government of President Hassan Rouhani imposed gasoline rationing and raised pump prices by at least 50 percent Friday, saying the move aims to help the needy with cash handouts.
The Islamic Republic provides some of the most heavily subsidized gasoline in the world, with the pump price previously standing at just 10,000 rials (less than nine U.S. cents) a liter (or about 34 cents per gallon).
"Increasing gasoline prices is to the people’s benefit and also to help the society’s strata under (economic) pressure,” President Rouhani told a cabinet meeting, quoted by state news agency IRNA.
"No one should imagine that the government has done this because it is economically struggling; not at all, not a rial of this will go to the treasury,” he added.
Each driver with a fuel card will now have to pay 15,000 rials (13 U.S. cents) per liter for the first 60 liters of petrol bought each month, said the National Iranian Oil Products Distribution Company.
Each additional liter will be charged at 30,000 rials.
Fuel cards were first introduced in 2007 with a view to reforming the subsidies system and curbing large-scale smuggling.
Iran’s economy has been under pressure ever since U.S. President Donald Trump withdrew from the landmark 2015 nuclear agreement between world powers and Iran and reimposed punishing unilateral sanctions.
According to Rouhani, currently "75 percent of the country are under pressure” and the extra revenues from the price hike are going to be used to help about 60 million Iranians in need.
Payments will start "within the next week or 10 days,” the head of Iran’s Planning and Budget Organization, Muhammad Baqer Nobakht, said.
The handouts will range from 550,000 rials ($4.68 based on latest open market prices) for couples to slightly more than 2 million rials ($17.46) for families with five members or more.
Ulta-low gasoline prices have led to high consumption, with Iran’s 80-million population buying an average of 90 million liters per day, according to IRNA.
They have also fueled high levels of smuggling — estimated at around 10 to 20 million liters per day, IRNA said.
Smuggling has intensified due to the rial’s drop in value.
Rouhani said in his speech that he had rejected calls by some in government to raise prices to regional levels to prevent smuggling, since it would increase inflation.
Iran’s energy consumption is too high and can be countered through "changing the culture and manufacturing good cars”, he said.
Efforts to phase out polluting cars in Iran were hampered after foreign companies such as Peugeot and Renault withdrew this year by the return of U.S. sanctions.
Rouhani had tried hike fuel prices in the budget last December but was blocked by parliament.
The measure proves to be as divisive now, with some on social media voicing their fears of further pressure on a troubled economy and others defending it.
Political factions mostly agreed on the move’s necessity but criticized the timing.
Principlist politician Ahmad Tavakoli tweeted that the price hike "will only shift the weight of the government’s incompetence to people’s shoulders” as it does not address core concerns.