Although Iranian Subsidy Reform Plan was aimed at fair distribution of subsidies, the goal was not achieved because of the way it was implemented by the previous government. Based on the latest data of International Monetary Fund (IMF), the top income deciles in Iran are enjoying five times the fuel subsidy used by poor people. According to the plan, the domestic price of gasoline must not be less than 90 percent of its freight on board price in Persian Gulf till the end of the Fifth Five-Year Development Plan (2015). Although gasoline price in the Persian Gulf market is $0.88-0.91 per liter, excluding transportation costs, subsidies paid by the government for imported and rationed gasoline are more than $0.56 and $0.66, respectively. In other words, the government will pay greater gasoline subsidy, compared to the pre-subsidy reform rate.
The IMF reports that 41 percent of gasoline subsidy belong to the 20-percent rich people and only 8 percent of it are used by 20-percent of the poor people, which clearly shows that the affluent people receive fivefold gasoline subsidy, compared to the poor ones. Based on the IMF report, the share of energy in urban and rural households comprises 4.2 and 6.3 percent, respectively.
The situation is much better in terms of electricity subsidy, such that 31 percent of its subsidy benefit 20 percent of rich people and only 13 percent are used by low-income deciles. In terms of kerosene, 20 percent of rich people enjoy 28 percent of the subsidy and 20 percent of low-income families receive 11 percent of the subsidy. Also, 19 percent of gasoline and gas oil subsidy and 35 percent of electricity subsidy benefit 40 percent of low-income people. Iran allocated 3 percent of Gross Domestic Product to gasoline and gas oil subsidy in 2012, while the figure was 3.5 percent for electricity subsidy in 2011.