TEHRAN (IPS) — Two months after the government of President Mahmoud Ahmadinejad began rationing petrol to “vaccinate” itself against possible sanctions, critics say the plan has failed to cut down gasoline consumption. Instead it has hurt the agriculture, tourism, transportation and other sectors of the economy.
Rationing did push consumption down by around 15 million liters a day. But where the average daily consumption stood at around 77 million liters, in the first three months prior to rationing, the first two months following rationing saw it drop to 61million liters, according to a report published by the Fars news agency. Demand is expected to rise considerably from late September when schools reopen.
Extra rations for various government organizations, groups of individuals with special needs and some businesses, as well as a bonus 100 liter “summer travelling ration” allocated by the government, have reversed the initial drop in consumption. Gasoline consumers under 45 different categories are now receiving additional gasoline rations, a member of the parliament economic committee was quoted by the Aftab Yazd daily as saying: “During the early stages of the implementation of the plan, traffic was reduced, gasoline consumption went down, there was less pollution and people accepted to learn to change their fuel consumption patterns… but creation of extra rations has destroyed all the initial achievements,” the hard line Jomhuri Eslami daily wrote: Traffic in the capital that had reduced by 15 percent in the early stages of the implementation of the gasoline rationing plan has bounced back to where it was, according to the traffic department of Tehran municipality. Tehran is home to nearly one-seventh of the Iranian population and accounts for a third of all the cars in the country.
One undesirable outcome of rationing is the creation of a huge black market for ration cards. Rations for private cars, taxis and pick-up trucks and even those of the government-owned cars can be purchased in the black market. The problem has pushed the government to consider revising taxi allocations, the interim oil minister was quoted by Oil and Energy Information Network (SHANA) as saying.
Companies whose businesses need transportation facilities are also picking up rations allotted to taxis, pick-up trucks and old cars. “Our company needed gasoline for our technicians to make their service rounds around the country. Work almost stopped during the first couple of weeks. Buying a few old taxi and pick-up trucks has solved our problem to some extent because their gasoline ration is several times more than that of ordinary cars,” the owner of a servicing company told IPS.
Implementation of gasoline rationing began for government cars from June 13. Riots broke out at gas stations 11 days later when the government suddenly announced rationing for private cars. More than 30 gas stations were torched and businesses and government offices plundered around the country by angry crowds.
Gasoline has for many years been sold at highly subsidized prices in Iran, at least five times cheaper than in some neighboring countries. The price differences made the smuggling of gasoline from Iran to other countries hugely profitable and millions of liters of gasoline were smuggled out daily. It is still sold at one-fifth of its real price but rationing has almost stopped the smuggling of gasoline, authorities say.
Iranian refineries, many of them outdated, have limited capacity to produce gasoline, and before rationing began the country had to import around 20 million liters of gasoline a day. Consumption has grown nearly 10 percent annually and before rationing began daily consumption sometimes topped the 80 million liter mark.
Iran imported 5.4 billion dollars worth of gasoline last fiscal year (Mar.21, 2006 — Mar.20, 2007). The budget law for the current fiscal year allows the government to import 2.5 billion dollars worth of gasoline. The figure is based on an average consumption level of 60 million liters a day. There will, however, be a gasoline import budget deficiency of 1.5 billion – 2 billion dollars for the rest of the current fiscal year due to the three month delay in implementation of the rationing plan.
The country’s fourth five-year development plan law stipulated that government raise the price of oil products to regional wholesale prices within the five years from the beginning of its implementation, i.e., until 2010. The previous government was stopped from implementing the law when the newly-elected hard line parliament voted for stabilization of prices, including that of gasoline.
In its budget for the current fiscal year the parliament, however, reversed its earlier insistence to keep gasoline prices unchanged and obliged the government to ration gasoline, increase its price, offer additional gasoline at market prices and improve public transportation.
“The government resisted implementation of the law for nearly three months and when it finally gave in, decided to implement rationing only. The government is still staunchly refusing to sell additional gasoline at free market prices and government cars are now using rationed gasoline (300 liters a month) at rationed price, whereas the law says that the government itself must pay for its gasoline consumption at free market prices,” an observer in Tehran told IPS on the condition of anonymity.
The legislation already requires the government to complement rationed gasoline with free market price gasoline. In the face of the government’s resistance, parliament is planning to pass a law to force the government to provide non-rationed gasoline at free market price, a member of the parliament energy committee was quoted by Aftab news as saying.
Using alternatives to petrol such as compressed natural gas (CNG) and liquefied petroleum gas (LPG) are seen as one way to cut down gasoline consumption. The government has decided to convert all vehicles used by the government to dual fuel within three months, the Mehr news agency reported.
Owners of private cars are also encouraged to get their cars converted — but there are problems even here.
“The government is encouraging people to convert their cars to dual fuel without having built enough stations. CNG and LPG stations are very few and there are always very long queues in front of the stations. I can fuel my car with LPG but the time I waste in queues to refuel the car is so much I prefer to use gasoline although it is much more expensive,” a Tehran resident who owns a dual fuel car told IPS.
Transportation costs have risen by at least 20 percent since the beginning of rationing and the higher costs have affected prices of nearly all goods. Services requiring transportation also cost higher now.
“Ahmadinejad claims a five-time increase in the price of gasoline, to bring it to the level of the free market prices, even if it is only for gasoline sold in addition to allocated rations, will result in a 100 percent increase in inflation. He is always blaming economic problems on mysterious ‘others,’ but this time inflation may be seen to be the result of the government decision to increase the price of gasoline,” the observer said.
“But he must really beware of the complications that rationing has caused. Here in the capital there are a thousand ways to buy extra fuel. Still all you hear is people complaining about the complications they have to face as a result of gasoline rationing,” he said.
“But people in places other than Tehran are the ones who are carrying the real burden of the problems created by rationing. In some provinces the price of gasoline in the black market is incredibly high and many people are losing the livelihood they earned from agriculture or tourism. The drop in consumption figures results from their deprivation. Unless the problem is addressed in some way by the government, their votes may be lost to him (Ahmdinejad),” he said.