Discord returns over Iran subsidy reform plan

TEHRAN (Reuters) - Iranian President Mahmoud Ahmadinejad has reissued a threat to withdraw plans to reform Iran’s costly subsidy system, after parliament passed it to the Guardian Council for final approval, Iranian media reported.

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

The reforms run the risk of creating a new lightning rod for opposition protests that have posed the biggest challenge to the Islamic Republic since 1979.

Iranian cities saw rioting in 2007 when a gasoline rationing system was introduced and economists say removing the subsidies could worsen already high inflation. The gasoline savings could reduce gasoline consumption and lighten the blow from any future U.N. sanctions over Iran’s disputed nuclear energy program that target gasoline imports.

“If the bill does not provide the necessary capacities for government to implement it, then we would withdraw it from the parliament,” state news agency IRNA quoted Ahmadinejad as saying on Wednesday. “If necessary, we will propose another bill.”

Parliament speaker Ali Larijani said on Wednesday the bill had been passed to the watchdog Guardian Council, which has to approve it to become a law.

“From parliament’s point of view, work on the bill is over and it has been sent to the Guardian Council,” the students news agency ISNA quoted him as saying.

Last month, Ahmadinejad appeared to have won a free hand from parliament over how the government spends the money saved. Subsidies are thought to cost the leading OPEC oil producer up to $100 billion a year.

The populist leader, who this week challenged Western powers with plans to build more nuclear reactors, had 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.

Ahmadinejad faced accusations of corruption, profligate spending and cronyism during his campaign for the June 12 vote.

Reporting by Reza Derakhshi, writing by Andrew Hammond