Subsidies in Iran

The economy of Iran includes a lot of subsidies. Food items, such as flour and cooking oil, are subsidized, along with fuels such as gasoline. However cutting subsidies can cause civil unrest. The Iranian targeted subsidy plan (طرح هدفمندسازی یارانه‌ها), also known as the subsidy reform plan, was passed by the Iranian Parliament in 2010. The government described the subsidy plan as the "biggest surgery" to the nation's economy in half a century and "one of the most important undertakings in Iran's recent economic history". The goal of the subsidy reform plan is to replace subsidies on food and energy (80% of total) with targeted social assistance, in accordance with a Five Year Economic Development Plan and a move towards free market prices in a 5-year period. The subsidy reform plan is the most important part of a broader Iranian economic reform plan. According to the government, approximately $100 billion per year is spent on subsidizing energy prices ($45 billion for the prices of fuel alone) and many consumable goods including bread, sugar, rice, cooking oil and medicine. However, some experts believe direct subsidies are about $30 billion, depending on oil prices. The subsidy system has been inherited from the Iran–Iraq War era but was never abolished. Iran is one of the largest gasoline consumers in the world, ranking second behind the United States in consumption per car. The government subsidy reform has been years in the making, for reasons which are unclear. Iran's Supreme Leader has backed the government’s subsidy reform plan. Iranian Economic Reform PlanEnergy in Iran and Fuel smuggling in Iran Iran spends the largest share of GDP on fossil fuel subsidies in the world. Many Iranian experts agree that these unsustainable subsidies encourage waste among goods, including in the production sector, ranging from gasoline to bread that must be stopped and the only way to do that is to redirect subsidies. The stated goal of the subsidy reform is "to rejuvenate Iran's economy, increase productivity, give it a new footing and bring it out of the slump it has been in for so long".