Tehran: Iran levied up to a five-fold hike in fuel prices from Sunday as the government started scrapping subsidies as part of a long-awaited economic overhaul, despite stiff resistance from conservatives.

The move comes after much debate in parliament which had criticised the scheme at a time when Iran's economy is reeling under inflation, high unemployment and sanctions.

Security forces were deployed across main squares and fuel stations in Tehran to prevent any violence as the new price regime came into force on Sunday.

Motorists were hardest hit by the policy change, which sent petrol prices soaring to 4,000 rials (40 US cents) from 1,000 rials per litre for the 60 litres they receive as a monthly quota, state television reported on its website.

They now have to pay 7,000 rials per litre for any extra petrol they require.

ILNA news agency, citing the economy ministry, said the monthly hike in household cooking gas charges was more than five-fold, electricity nearly three-fold, and water more than three times.

Tehran municipality said the rises would not lead to fare hikes of metro rail network and city-run buses in the capital, but taxis would review their tariffs.

The government plans to phase out over a five-year period subsidies on energy and food including water and bread as part of the reforms which had been in the pipeline for several years.

Subsidies on these products cost the state's coffers about 100 billion dollars a year, according to official estimates.

A 2007 attempt by government to ration petrol triggered riots in Tehran, and, on Sunday, police guarded several fuel stations in the capital to prevent any repeat of the violence.

"So far no untoward incident has been reported since the implementation of the plan," Tehran police chief Hossein Sajedinia told Mehr news agency.

On Sunday, Ahmadinejad thanked citizens for "cooperating" in the initiative.

"I believe the Iranian nation... will move forward till the last stages of this great economic plan," state television quoted him as saying.

The president had announced the hikes on Saturday night, saying "for the moment we do not have plans to free the prices, but the prices will be corrected."

Ahmadinejad has been severely criticised for pushing the scheme which was initially due to start in September.

Part of Iran's ruling conservative camp says the plan would further stoke inflation.

But the government toned down the potential impact of the plan and maintains that inflation has already fallen to single digits.

The conservative parliament had also tried to delay the implementation of the changes by challenging the government's sole authority to decide on how to distribute among the poor savings generated from the subsidy cuts.

Speaker Ali Larijani, a strong critic of Ahmadinejad's policies, told the assembly on Sunday that the "implementation of this law requires a national will and public participation."

Analysts broadly welcomed the initiative.

Leading economic daily Donya-e Eqtesad said the scheme broke a five-decade old addiction to subsidies and reduced government control.

"It will be rewarding in the future as freedom from a state-controlled subsidised and protectionist economy is hard for social classes in the short term but guarantees good fortune in the long-run," it said in a front-page editorial.

"Major economic reforms have inevitable woes. If we do not undergo them today we will be forced to do so tomorrow."

Mohammad Hirad Hatami, a conservative economic analyst, told AFP the plan was "undoubtedly positive as it would entice manufacturers to modernise their machinery."

He said the government also aims to "decrease the number of unnecessary private car commuters, but the price hike (on petrol) is not high enough and so crowded streets will continue to be crowded."

To offset the rising prices, the government has begun to pay part of the expected savings from subsidy removals in the form of direct aid to the people.

According to official figures, some 60.5 million Iranians have already started to receive 890,000 rials (around 78 dollars) paid into bank accounts every two months.

This represents 2.5 billion dollars a month in the state budget.