TEHRAN — Iran levied up to a five-fold hike in fuel prices from Sunday as the government started scrapping subsidies as part of a long-awaited economic overhaul, despite initial resistance by conservatives.
The move comes after much debate in parliament which had criticised the scheme at a time when Iran's economy is reeling under inflation, high unemployment and sanctions.
But on Sunday lawmakers welcomed the plan.
Security forces were deployed across main squares and fuel stations in Tehran to prevent any violence as the regime came into force.
Motorists were hardest hit by the policy change, which sent petrol prices soaring to 4,000 rials (40 US cents) from 1,000 rials per litre for the 60 litres they receive as a monthly quota, state television reported.
They now have to pay 7,000 rials per litre for any extra petrol they require.
ILNA news agency, citing the economy ministry, said the monthly hike in household cooking gas charges was more than five-fold, electricity nearly three-fold, and water more than three times.
Tehran municipality said the rises would not lead to fare hikes of metro rail network and city-run buses in the capital, but taxis would review their tariffs.
The government plans to phase out over a five-year period subsidies on energy and food including water and bread as part of the reforms which had been in the pipeline for several years.
Subsidies on these products cost the state's coffers about 100 billion dollars a year, according to official estimates.
To offset the rising prices, the government has begun to pay part of the expected savings from subsidy removals in the form of direct aid to the people.
According to official figures, some 60.5 million Iranians have already started to receive 890,000 rials (around 78 dollars) paid into bank accounts every two months.
This represents 2.5 billion dollars a month in the state budget.
A 2007 attempt by government to ration petrol triggered riots in Tehran, and, on Sunday, police guarded several fuel stations in the capital to prevent any repeat of the violence.
"So far no untoward incident has been reported since the implementation of the plan," Tehran police chief Hossein Sajedinia told Mehr news agency.
On Sunday, Ahmadinejad thanked citizens for "cooperating" in the initiative.
"I believe the Iranian nation... will move forward till the last stages of this great economic plan," state television quoted him as saying. The president had announced the hikes on Saturday night.
Ahmadinejad had been severely criticised for pushing the scheme which had been due to start in September. Part of Iran's ruling conservative camp had resisted the plan initially, saying it would further stoke inflation.
But the government toned down the potential impact of the plan and maintains inflation has fallen to single digits.
The conservative parliament tried to delay the changes by challenging the government's authority to decide on how to distribute among the poor savings generated from the subsidy cuts.
But on Sunday, 175 lawmakers in the 290-seat parliament thanked Ahmadinejad for moving ahead with the cuts "when enemies of the Islamic revolution are attempting to show by imposing sanctions that the economic situation of the country is turbulent and disorganised."
"The implementation shows the stability of the economy, high potential of country's management and the massive solidarity among the people and the government," they said in a letter published by state news agency IRNA.
In a front-page editorial, leading economic daily Donya-e Eqtesad said the scheme broke a five-decade old addiction to subsidies, and "guarantees good fortune in the long-run."
"Major economic reforms have inevitable woes. If we do not undergo them today we will be forced to do so tomorrow."
Mohammad Hirad Hatami, a conservative economic analyst, told AFP the plan was "undoubtedly positive as it would entice manufacturers to modernise their machinery."
He said the government also aims to "decrease the number of unnecessary private car commuters, but the price hike (on petrol) is not high enough and so crowded streets will continue to be crowded."
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