Iran MPs back outlines of subsidy reform plan

By Hashem Kalantari and Fredrik Dahl

TEHRAN (Reuters) - Iran's parliament approved the outlines of a subsidy reform bill on Sunday, seven months after it threw out the plan from the annual budget proposal because of fears it would stoke inflation in the major oil producer.

Even though MPs can still reject aspects of the bill in voting due later this week, the clear margin of 188 votes for and 45 against in Sunday's session is likely to be welcomed by the government of President Mahmoud Ahmadinejad.

If the draft law is approved without major changes, it would be a further sign of the hardline president consolidating his position after his disputed re-election in June plunged Iran into months of political turmoil.

The government wants to raise energy and utility prices and compensate low-income families with direct cash payments.

Critics say this would push up inflation, now running at about 13 percent annually after it hit a high of nearly 30 percent a year ago.

In March, MPs dealt a political blow to Ahmadinejad by removing the subsidy reform plan from the 2009-10 budget bill. He accused them of violating the constitution.

Defending the proposal on Sunday, Economy Minister Shamseddin Hosseini told MPs that hefty fuel subsidies mainly benefited the wealthy, not the poor.

"One third of the country's income is paid out as subsidies, either openly or in a hidden way, and there is no doubt that these resources are not spent correctly," he said.