Effects of Subsidies Targeted of Energy Carriers on Agriculture and Food Industry in Iran

Abstract Regarding to increased subsidies and their financial burden on the government budget, have forced the government to pay more attention to reduce and to pay them in a targeted system. Hence, due to importance of agriculture and food industry in food security, this study investigates the effects of targeted subsidies of energy carriers on agriculture and food industry. For this purpose, a Computable General Equilibrium (CGE) model and social accounting matrix (SAM) for 2001 has been developed. The results indicate that by increased energy prices, intermediate cost in agriculture and food industry will increase and production will decrease deeply, leading to decrease in demand for capital input and investment and increase import of the main food items. According to the results, protection in different ways, such as tax breaks and special lending to improve production methods are suggested.