Iran fuel import budget seen running out soon

TEHRAN (Reuters) - Iran will exhaust its annual budget for gasoline imports by August 1, more than seven months before the financial year ends, if fuel consumption continues at the same pace, officials said in remarks published on Sunday.

OPEC's No. 2 oil producer, which lacks refining capacity to meet domestic demand and imports 40 percent of its fuel, allocated $2.5 billion for imports until March 19, 2008.

That was half the amount spent last year but consumption was expected to drop with plans to ration gasoline.

But rationing has only been partially implemented and even though the price motorists pay for fuel was raised 25 percent to 1,000 rials (11 U.S. cents) a liter, it remains some of the cheapest in the world and analysts say this encourages waste.

"By continuing the current pace of consumption, the $2.5 billion budget for importing gasoline will be finished in the first 10 days of (Iranian month of) Mordad," Ali Farahani of the National Oil Products Distribution Co. was quoted as saying.

His comments, carried by the daily Hamshahri, indicate that the budget allocation would be spent by August 1.

Hojjatollah Ghanimifard, international affairs director of the state-owned National Iranian Oil Company, also said the budget would last a further month and a half, taking it to early August, the Oil Ministry's official Web site reported.

The government originally allocated $2.5 billion in the year to March 2007 but asked parliament for more when cash began running short. It eventually spent about $5 billion on imports.

All fuel for motorists is subsidized which is a heavy drain on state coffers. It also encourages waste and a thriving smuggling trade to neighboring countries where gasoline is far more expensive, analysts say.