Iran subsidy reform bill to be sent back to MPs

TEHRAN Wed Dec 9, 2009 5:20pm GMT

TEHRAN Dec 9 (Reuters) - A powerful legislative body sees problems with a proposal to reform Iran's costly food and energy subsidy system and will send the draft law back to parliament for more work, a spokesman was quoted as saying on Wednesday.

"The subsidy reform bill has been studied by the Guardian Council and it has some problems with it and it will be returned to parliament," said Abbasali Kadkhodai, a spokesman for the 12-member body, the official IRNA news agency reported.

Kadkhodai said he would give further details at a news conference on Saturday.

Last week, President Mahmoud Ahmadinejad reissued a threat to withdraw the plan to gradually remove energy and food subsidies, after parliament passed it to the Guardian Council for final approval.

Ahmadinejad and parliament have disagreed over control of the money saved through the reform. Some MPs had predicted that the bill would be returned to the assembly, saying it could pave the way for a compromise with the government.

Ahmadinejad, who faced widespread opposition protests after his re-election in June, wants to save up to $100 billion annually from subsidies on gasoline, natural gas, electricity, water, food, health and education.

The gasoline savings could reduce consumption and lighten the blow from any future Western sanctions over Iran's disputed nuclear energy programme that target fuel imports.

Last month, Ahmadinejad appeared to have won a free hand from parliament over how the government spends the money saved.

He has threatened before to remove the reform -- which successive Iranian governments have failed to tackle -- if his hands were tied over spending.

State media have said the government will open bank accounts for 36 million people, about half the population, to give them cash to compensate for the higher food and energy prices.

Critics say the government's reform plan will hurt many ordinary Iranians already struggling to cope with rising consumer prices.

(Reporting by Reza Derakhshi; writing by Fredrik Dahl; Editing by Ruth Pitchford)