Iran parliament may accede to president on subsidies

TEHRAN Sun Mar 21, 2010 11:47am EDT

Iranian President Mahmoud Ahmadinejad speaks during a news conference in Kabul March 10, 2010. REUTERS/ Omar Sobhani

Iranian President Mahmoud Ahmadinejad speaks during a news conference in Kabul March 10, 2010.

Credit: Reuters/ Omar Sobhani

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TEHRAN (Reuters) - Iran's parliament could finally accede to President Mahmoud Ahmadinejad's demands for radical subsidy cuts after blocking the plan for months, a senior lawmaker said on Sunday.

Parliament this month passed a state budget for the next Iranian year starting March 21 that did not contain radical cuts in subsidies sought by Ahmadinejad.

Ahmadinejad on Friday suggested holding a referendum on a reform to the Islamic Republic's costly subsidy system that would save $40 billion. Parliament approved only half that amount.

"We believe it is not possible to implement the subsidy reform plan at 20,000 billion tomans ($20 billion)," Arsalan Fathipour, head of parliament's economic commission, was quoted on state news agency IRNA as saying.

"So delegates intend to raise the figure to 35-38,000 billion tomans ($35-38 billion)."

It was not clear how such a last-minute change would be effected, since last week the Guardian Council constitutional watchdog signed off the budget approved by parliament.

Parliamentarians had said the cuts could stoke inflation. Analysts say they could also provoke unrest in a country already plagued by tension after street protests by opponents of Ahmadinejad over the past year. A referendum could risk more unrest.

Parliament first stymied the government's subsidy reform plans last year by approving the general outlines but linking the plan to the state budget to enforce parliamentary oversight of how the money saved is spent.

Three prominent members of parliament issued a statement criticizing Ahmadinejad over the referendum idea, calling him to a televised debate on the issue, Fars news agency said on Saturday.

Supreme Leader Ayatollah Ali Khamenei, the ultimate arbiter in major policy issues, avoided taking sides in a speech to mark the Iranian new year.

"The subsidy reform bill is very important and government and parliament should cooperate," he said. "All state bodies should help the government. On the other hand, the government should consider what is a law as credible and valid."

Analysts say Ahmadinejad hopes the subsidy cut will make Iran less vulnerable to any U.N. sanctions on its gasoline imports and it would allow the president to channel some of the cash saved directly to constituents who support him.

Iran is the world's fifth-largest crude exporter. But while oil prices have surged, Iran's economy has slowed as a result of the global economic downturn, political isolation and sanctions over its nuclear energy programme.

(Reporting by Ramin Mostafavi and Hossein Jasseb; Writing by Andrew Hammond; Editing by Janet Lawrence)

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