Government Distributing Money Through Sale of Factories

Two days ago, two reports on government violations were read out in Iran’s parliament, the Majlis. According to published reports, the money that the government used to provide the public with subsidy stipends came from the wrong source, i.e., from an unlawful source. The government’s implementation of the subsidy law took place with many mistakes.

The second violation involved the regulations regarding the sale of the Hormozgan Steel plant to the private sector. A report that was published jointly by the Industries Committee and Article 44 [of the constitution] committee regarding the transfer of the Hormozgan Steel project and prohibition of using earned funds for incomplete project was read out in the Majlis.

Ali Asqar Yusefzadeh, the spokesperson of the industries committee read out the report and said, “On recommendation from the ministry of industries, the government decided to sell Hormozgan Steel project for cash and then fully allocate the funds to completing incomplete projects and to support industrial units on the basis of the targeted subsidies law. But this mechanism was contrary to Majlis’s budget law for 2010 which specifically stipulated that the funds generated through the sale of this project were to only partially meet the needs of incomplete projects.”

Based on the budget law for 2010, the government, and the Organization for the Development and Renovation of Iranian Mines and Industries prices the Hormozgan Steel project at 6,860 billion Rials (about USD 686 million) and put out an RFP. Foolad Iran company (Iran Steel Corporation) wins the competition for 8,550 billion Rials.

But the representative of the Privatization Organization claims that this transfer had to take place through a decree (i.e., the approval) of the transfer committee. The way it was handled, however, was not objected by the General Accounting Organization (the government’s investigative arm of government operations) and the Majlis confirmed the transaction as well.

After the transaction and following the provisions of the budget law of 2010, the president’s deputy for planning and operations placed the received funds from the sale at the disposal of the ministry of industries. Following this, the General Accounting Organization declared that the cabinet’s decree to use the acquired funds for the provisions of the law for targeted subsidies as unlawful because the Majlis had earlier specifically identified how the funds had to be spent.

The previous week, the head of Article 44 Committee of the Majlis had provided Fars news agency the full text of the report prepared by two Majlis committees (industries and oversight of article 44 implementation) regarding the transfer of Hormozgan Steel project. It also had revealed that the manner in which the 855 billion Toman that had been acquired, through sale of Hormozgan Steel plant for the purpose of targeting subsidies and the annulment of the cabinet order of March 18, 2011, was unlawful.

Two days ago, Yousefnejad said that this government violation caught by the General Accounting Organization was acknowledged by the Majlis. “The government decree to use the 8,550 billion Rials for meeting the expenses of the law on targeted subsidies was a violation of the constitution,” he said.

He made reference to the numerous communications between Mohammad-Reza Rahimi and Azizi, the president’s assistant for planning all which were a violation of the constitution because they were contrary to Majlis laws in the law on targeted subsidies.

Eventually this government bill was put to vote in the Majlis and passed with 157 votes out of 217. Alef website belonging to Ahmad Tavakoli interpreted this vote as a yellow card to the administration.

According to Khabar Online, on the day that subsidies were made available to the public, long ATM lines were formed by people who wanted to withdraw their stipends.

Outside the Majlis, Ali Larijani (the speaker of the parliament) criticized the targeted subsidies and government’s policies. According to Mehr news agency, he said, “The targeted subsidies were not implemented properly because we had reserved 30 percent of the funds acquired from this law to help agriculture and industry” (rather than being directly distributed to the general public).

Now that the source of funds for the government’s payment of subsidy stipends to the public has been exposed, the news coming from the administration is that while it has no plans to end the subsidies, the original law specifically provides that payments should be made based on income levels. So the government’s future direction in the payments of these subsidies will be to follow these guidelines (i.e., pay only those who it deems need it, rather than everybody, something that it has been doing till now).

Experts in the field believe that the honeymoon days of subsidy stipends are over and that the government was going to have a tough time in this regard in future. Production costs are much higher now and market forces are out of control. The government they believe lacks the funds to payout event he current subsidies and so it must eliminate the names of some 19 million recipients because of its shortage of funds.

Source: Rooz Online