Petrol prices soar as Iran axes subsidies

19 Dec 2010, 9:07 am   -   Source: AAP
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Petrol prices shot up as much as fourfold as the Iranian government started to implement its plan to remove subsidies on energy and food products.

Domestic petrol prices shot up as much as fourfold on Sunday as the Iranian government started to implement its controversial plan to remove subsidies on energy and food products.

Iran previously had two prices for petrol, with motorists allocated a quota of 60 litres of petrol per month at a subsidised price of 10 US cents per litre. Beyond this quota, they had to pay 40 cents a litre.

From Sunday, the motorists will have to shell out 40 cents for the monthly quota of 60 litres, and 70 cents for the rest of their purchase of petrol, a hike of 75 per cent, state television announced on its website.

In a late-night interview on state television, President Mahmoud Ahmadinejad announced that the scrapping of subsidies will start to take effect from early on Sunday.

"There will be statements issued after this program by the authorities. For the moment we do not have plans to free the prices, but the prices will be corrected. New prices will be announced tonight," he said.

The government plans to phase out subsidies on energy products such as petrol, diesel, gas, kerosene and electricity, and food items such as water and bread.

According to official estimates, subsidies on these products cost state coffers around $US100 billion ($A101.32 billion) a year.

Soon after Ahmadinejad's announcement, AFP reporters saw motorists queueing outside petrol stations in Tehran to fill up their tanks before the new fuel prices were announced.

Tehran governor Mortaza Tamaddon urged people "not to gather at petrol stations as there was no problem to meet the city's need for petrol", state news agency IRNA reported.

On Saturday, however, Iranian authorities gave 50 litres of petrol at a price of 10 cents as an exceptional measure, media reports said.

Ahmadinejad has been severely criticised by various groups for the subsidy removal plan which has been delayed by three months.

Part of Iran's ruling conservative camp says the plan would further stoke inflation at a time when the economy is already reeling under high price rises and unemployment.

But the government has toned down the potential impact of the plan and maintains that inflation itself has already fallen to single digits.

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