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Iran Plans To Cut Subsidized Gasoline Quota

Iranians show their rationing cards at a gas station

Iranians show their rationing cards at a gas station

TEHRAN (Reuters) -- Iran plans to nearly halve the amount of gasoline that motorists can buy at a heavily subsidized price, state television reported, in what could be a politically controversial proposal.

It quoted Oil Minister Masud Mirkazemi as saying that under the plan, to be considered by parliament next week, the quota of subsidized gasoline would be reduced to 55 liters per month from 100 liters now.

The proposal comes as the United States and its European allies explore ways of targeting fuel imports into Iran if it continues to press on with its nuclear program.

Iran, the world's fifth-largest crude oil exporter, lacks refining capacity to meet its domestic fuel needs and has to import up to 40 percent of its gasoline requirements, which it then sells at a subsidized price.

If approved by parliament, the government would only be allowed to sell 4 million liters of gasoline per day under the rationing scheme, in which motorists can buy subsidized fuel if they have electronic "smart" cards, television reported.

"Based on this plan, every fuel card will receive only 55 liters of gasoline [from 100 liters now]," Mirkazemi said.

Under a scheme introduced in 2007, which sparked protests in Tehran, motorists can buy the rationed fuel for 1,000 rials per liter (around $0.10). Any amount above that costs about four times more.

Before then, they were able to buy unlimited amounts of heavily subsidized gasoline, encouraging consumption and burdening state coffers.

Despite rationing, Iran's gasoline demand is rising at some 6 percent annually as 700,000 new cars are coming onto the country's roads each year, a senior oil official said in May.

The proposal to cut the subsidized gasoline quota is part of a wider government plan to reduce energy subsidies and compensate those in need with direct payments. Officials have previously said Iran plans to eliminate subsidies by 2011.

Iran's deputy oil minister in charge of planning, Ebrahim Radafzun, said in published remarks on October 6 that it would need an additional $6.5 billion to help pay for imports of gasoline and diesel fuel during the 2009-10 budget year.

In comments carried by business daily "Abrar-e Eqtesadi," Mirkazemi warned firms that sell gasoline not to halt deliveries to Iran in response to Western sanctions moves, saying they would be dropped from its list of suppliers.

The West suspects the Islamic state is covertly seeking to develop nuclear weapons, although Iran has vehemently denied it.

Iranian officials have repeatedly shrugged off the threat of any sanctions measures targeting its fuel imports, saying the country, a member of the Organization of the Petroleum Exporting Countries (OPEC), would be able to find sufficient supplies.