Iran Natural Gas Subsidy Reform Model

In different countries, to facilitate the access of energy to the low-income groups of the society, energy subsidies are granted in various ways, hidden in the carrier price (hidden subsidies) or cash. Subsidizing the carrier not only does not ensure a fair distribution of income to the community but also upsets the balance of supply and demand in the energy market, reduces investment, threatens energy security, low energy efficiency, and environmental damage.

In Iran, the natural gas carrier has the highest share (39%) of the total subsidy of $ 50 billion. These subsidies have led to low productivity and significant energy losses. Low gas prices have reduced investment and increased the accumulated debt of energy companies (affiliated with the Ministry of Oil). The central part is the debt of 60 billion dollars of the National Iranian Oil Company and 100 thousand billion tomans of the gas company resulting from this issue.

To reform the subsidy system, various methods such as “liberalization of gas prices to export prices,” “creating an organized market by allocating quotas to each citizen,” “increasing prices for high-consumption consumers,” and “floating pricing based on consumption” can be Is an offer.

The Challenge: What is the appropriate model for equitable redistribution of natural gas subsidies so that the revenue model of the subsidiaries of the Ministry of Oil is also improved?

In answering this question, various considerations must be taken into account; Includes: multiplier difference in consumption of domestic and commercial sectors in hot and cold seasons; Existence of hot and cold climates in the country with different price levels; Most of the natural gas subsidies are in the form of fuel for the power plant, and the two carriers of gas and electricity can be substituted in consumption; The sudden rise in the price of natural gas increases the cost of electricity, steel, cement, and other manufacturing industries.