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January 17, 2005

Analysis: Price Controls Get Mixed Reception In Iran

by Bill Samii

"Young physicians in our country live below the poverty line," Dr. Iraj Khosronia, head of the General Practitioners Society, said in a 15 January interview, "Resalat" reported the next day. He said they earn less than 1.5 million rials (about $190) per month. After completing medical school, the young physicians do their compulsory military service, Khosronia said, but then some of them leave the medical profession to work in other, more lucrative fields.
One of the means by which the government is trying to reduce the adverse impact of low earnings is by implementing price controls. On 11 January the legislature approved a bill to stabilize prices during the year starting March 2005, Mehr News Agency reported. This measure is intended to confront inflation and will affect the price of gasoline and other petroleum products, gas, electricity, water, telephone, and postal services. One day later the bill was modified so gasoline rationing would not take place in the second half of the Iranian year (21 March 2005-20 March 2006), "Sharq" reported. 63 million liters of gasoline is consumed in Iran every day, and 23 million liters of gasoline is imported. Deputy parliamentary speaker Mohammad Reza Bahonar predicted that rationing would be required if imports are stopped, and he recommended postponing this measure.

Price controls appear to be popular. A survey by the parliamentary research center found that 72.6 percent of 1,300 respondents in Tehran said this measure would control inflation, "Kayhan" reported on 10 January. Some 81 percent of respondents also objected to the proposal to increase gasoline prices to 2,000 rials per liter ($0.25).

Gasoline currently costs 800 rials (about $0.10) per liter. Each liter of imported gasoline costs 2,800 rials and each liter of domestically produced gasoline costs 2,500 rials, Deputy Oil Minister Mohammad Aqai said on 28 July, according to IRNA.


Gasoline consumption in Iran is very high because many automobiles are old and poorly maintained, and because there are not enough new automobiles available. Moreover, much of the inexpensive gasoline that is available is smuggled out of the country. Deputy Oil Minister Aqai said on 21 September that 1.5 million liters of gasoline are smuggled across the border daily, IRNA reported.

Not everybody welcomes the idea of price controls, particularly the executive branch and reformist legislators. Reformist parliamentarian Iraj Nadimi said prior to the price-stabilization bill's approval that this is not a new plan and it is not even a very good one, "Farhang-i Ashti" reported on 10 January. He went on to describe the discussions on the plan's formulation as more political than economic. "Sharq" described the price-stabilization plan as a measure intended to earn public support during the upcoming presidential election.

Parliamentary speaker Gholam-Ali Haddad-Adel denounced critics of the bill as demagogues motivated by the election, "Resalat" reported on 12 January. Speaking in populist terms, he asked, "Is this policy advantageous to the poor and the people?"

Reports from the eastern part of the country, where a six-year drought has compounded the situation, indicate the difficulties some Iranians are facing. A neighborhood in Birjand, the capital of South Khorasan Province, consists of "half-finished houses built with tin and fruit boxes," "Ava-yi Birjand" reported on 5 September. There is one water tap to serve the neighborhood, and the municipality reportedly demanded 2 million to 3 million rials from each family if they want water service. A resident said that some homes have no electricity, and local sanitation is "very limited." Garbage collection takes place just once a week. A teacher from the city said many of her students are malnourished, "Ava-yi Birjand" reported on 19 October.

"Mardom Salari" reported on 5 August that the drought's destruction of farmland and rising unemployment have forced many people in Birjand to earn a living through fuel smuggling.
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