Iran’s oil ministry has asked the government to allow it to increase domestic gas prices by as much as 10 times to curb the country’s spiralling consumption.

“To deal with this problem, I proposed to increase the price of gas to at least IR900-1,000 (almost $0.1) a cubic metre,” Oil Minister, Masoud Mirkazemi told state-run Mehr news agency.

Iranian domestic consumers currently pay IR170 for a cubic metre of gas. It is hoped the increase to almost $0.1 a cubic metre would result in an improvement in the country’s wasteful consumption patterns and save the government some $17bn.

Iran, which has the world’s second-largest gas reserves, is aware that subsidies offer far too much help to local industries by keeping the price of petrol, natural gas and electricity artificially low.

The country’s budget, which was approved by parliament in March includes a series of cuts to energy and food subsidies, despite fears that the planned cuts could spark a rapid increase in inflation rates. Inflation currently stands at 8.9 per cent, having hit almost 30 per cent in late 2008.

Parliament amended the government’s estimate of savings from subsidy cuts to $20bn from the original $40bn (MEED 24:12:09).

In 2008, Iran produced 116 billion cubic metres of natural gas, 96 per cent of which was consumed domestically. The government plans to spend $200bn in an effort to almost double gas production over the next five years. It wants to expand production from the current 600 million cm/d to 1 billion cm/d by 2014.