Mohammad-Reza Farzin, Either the vice minister of finance who oversees the new welfare program, said the main shortcoming of the program is the fact that many well-to-do families draw welfare benefits.
He said that in the coming Persian year he hopes to trim the welfare rolls by about 10 million people or 13 percent. Farzin was quoted by state television as saying, “If the welfare payment is equal to 5 or 10 percent of a person’s monthly income, that person does not need the cash payment.”
Five to 10 percent is a very broad range. It would mean he wants to kick off welfare those earning somewhere from $450 to $900 a month.
But he didn’t say where between those numbers he would draw the line, suggesting that the regime is far from deciding what to do to cut costs. The welfare system began in December 2010.
It pays every citizen 455,000 rials per month or about $41 at the current official rate of exchange. A family of five thus gets more than $200 each month from the state.
With almost every Iranian signed up for welfare, the program costs the state almost $40 billion a year.
Knocking the wealthiest 10 million off the rolls, would save almost $5 billion a year. However, Behruz Moradi, the director of the office that handles subsidies and welfare payments, said Sunday the welfare payments would be increased as of Now Ruz.
He didn’t say by how much, but inflation is running at almost 20 percent by official estimates so any increase of less than 25 percent would not preserve the original value of the welfare payments set at the start of the program 15 months earlier.
Moradi said the government would begin trimming the rolls by first asking the wealthiest heads of households to voluntarily opt out of the payments.
But President Ahmadi-nejad made that appeal almost a year ago. No one has said how many people have asked to be taken off the welfare rolls, suggesting the number isn’t great.
Moradi said that if 10 million people don’t voluntarily drop out of the program, “more precise methods will be used.” But he didn’t hint at what those methods might be. And that is the whole point.
The government said back in 2010 that it couldn’t figure out how to do that. Until it announces a procedure, all talk about trimming the rolls sounds hollow.
The original law that called for phasing out subsidies on energy and bread provided for scaled welfare payments to replace the subsidies.
The Majlis voted that every Iranian should receive welfare payments, but that the richest decile (10 percent of the population) should only receive a fraction of the payments to the poorest decile. As the payment system was devised, the Ahmadi-nejad Administration couldn’t figure out how to do that.
So, it just ignored the law and decided to make equal payments to every citizen regardless of income. That has made for an extremely costly system one where the payments to families far exceed the savings from phasing out subsidies.
The latest welfare payments were made electronically into family bank accounts on Wednesday of this week. Originally, the payments were made every other month but that was quickly changed to a monthly disbursement.
The other side of the program is the scale of subsidies. Moradi said, “As long as household earnings have not increased, the price of fuel will not increase.” But he neglected to say if the government’s calculations show household earnings have increased!
The Mehr news agency earlier reported that Moradi’s organization was looking at boosting the price of compressed natural gas (CNG) by anywhere from 8 percent to 35 percent as of Now Ruz.
CNG is being heavily promoted by the government as a substitute for gasoline and a significant portion of new car sales in Iran are of CNG-powered cars.
CNG now sells for 3,000 rials per cubic meter. Mehr said Moradi’s office was considering alternative hikes to 3,250 rials, 3,600 rials, 3,850 rials or 4,050 rials per cubic meter.
The Mehr report said was silent on possible hikes in prices for gasoline and other fuels. Any change in prices is not expected to be announced until the last day of the Persian year, March 19. Mehr said Iranian service stations were now selling 18 million cubic meters of CNG daily, which it said was a savings of 18 million liters of gasoline. That would mean almost one-quarter of all automotive fuel is now CNG. Moradi went to the Majlis last Tuesday to discuss the next phase of the program, but became embroiled in a physical altercation with Deputy Hossain Hossaini.
The scuffle came after Moradi completed his speech and sat down. There are conflicting reports about who started the fight.
Some deputies who witnessed the incident claimed Hossaini slapped Moradi first, but it was Moradi who was expelled from the chamber by Speaker Ali Larijani.
The altercation began after Hossaini complained angrily that Moradi was not making payments to businesses and industries hurt by the elimination of subsidies.
The legislation required that 20 percent of the savings from eliminating subsidies be paid to businesses hurt by the higher cost of fuel, electricity or water. But the Ahmadi-nejad Administration has also ignored that part of the law.
