TEHRAN: Iran will begin deregulating the heavily subsidised prices for oil products in three stages in the year starting in March.

Deputy oil minister in charge of planning Akbar Torkan said it was part of President Mahmoud Ahmadinejad's economic reform plan that includes increasing energy prices and paying direct subsidies to the needy people instead.

The president's reform bill was presented to parliament on Tuesday, which voted to debate it swiftly.

The plan needs parliament's approval before implementation.

"The deregulation of the prices of oil products, such as petrol and gas oil, will be done in three phases next year," Torkan said, referring to the next Iranian year which starts on March 21.

Iran is the world's fourth-largest exporter of crude, but lacks enough refining capacity to meet domestic petrol needs, forcing it to import large amounts which it then sells at subsidised prices, burdening the country's budget.

Seeking to curb soaring consumption, Iran launched rationing in 2007 that limited how much petrol motorists could buy at the heavily subsidised rated of 1,000 rials (about 10 US cents). Any additional fuel costs four times more.

When presenting his bill, Ahmadinejad told MPs targeting subsidies could not be done without making prices "as real as possible".

Other officials have previously said the country planned to gradually cut the amount of subsidised petrol sold from this year and completely eliminate such subsidies by 2011.

Torkan repeated Ahmadinejad's comments that subsidies would be directly paid to those most in need.

"We believe that subsidies should be paid to those in need in cash because the consequences of hiking energy prices show themselves more on the most needy," he said.

Officials say that, under the current system, subsidies often most benefit wealthier Iranians rather than the poorest which they are aimed to help.