intorduction: Subsidy policy has been one of the most challenging economic policy, especially after1970s.Current Iranian government claims that it has started the reforming policy in connection with subsidy plan from December 2011.Although reforming policy is theoretically urgent and helpful policy for all including Iran ,to achieve its goals it requires a comprehensive infrastructural package. Implementing such policy incautiously, could be problematic. Lack of the above package in Iranian experience under recent and current government (2005-2011) is going to endanger usual and positive outcomes of subsidy policy. Considering the above concern, this paper is investigating the case in question.

Method: after some literature review it is based on econometric methods and it uses time series data 1974-2011 periods (by assistance of auto regression model).

Findings: 1-Gini coefficient and general indicators of welfare show that there is a high inequality in Iranian economy in the period of this study. 2-regarding current administration, the subsidy policy would worsen the income distribution, and in long run social welfare.

Conclusion: Given the current administration and due to inefficiency of basic infrastructures of policy itself, subsidy policy would worsen the income inequality, and thus from social welfare point of view, it doesn’t work in its consistent and efficient framework.