Sunday,22 July, 2018
Current issue | Issue 1140, 21 - 27 March 2013
Sunday,22 July, 2018
Issue 1140, 21 - 27 March 2013

Ahram Weekly

Differences over bread

Bakery owners are dissatisfied with a new system regulating the production of subsidised bread, reports Mona El-Fiqi

Al-Ahram Weekly

Hundreds of bakery owners from different governorates blocked Qasr Al-Aini Street in downtown Cairo this week near the Ministry of Supply and Internal Trade in order to protest against a new system to regulate the production and distribution of subsidised baladi bread.
The bakery owners also expressed their anger at the new system by preventing government trucks from distributing flour to bakeries in northern Cairo, leading to a shortage of bread in the district.
The new system, which has begun to be applied to 500 bakeries in Greater Cairo, aims to combat the smuggling of flour meant to produce subsidised baladi bread. It frees up flour prices and it distributes bread according to national identification numbers in a bid to guarantee that it is not traded on the black market.
The new system has previously been applied in pilot projects in Port Said and Beni Sweif, with the intention being to expand it across the country.
Under the new regulations, bread will be produced at market prices by bakers but sold at the subsidised price, with the government making up the difference in direct payments to bakeries.
Under the new system, subsidies on flour are removed, and bakeries buy flour at the market price of LE285 per 100kg instead of the subsidised price of LE16. They still need to bake the baladi bread according to the existing weight and quality criteria, with each loaf weighing 130g.
Officials say that the elimination of the flour subsidies will not mean an increase in bread prices. The government is committed to keeping the price of subsidised baladi bread at LE0.05 per loaf, even while its cost price is currently LE0.34, according to figures released by the Ministry of Supply and Internal Trade.
The protesting bakery owners said they were not against the principle of flour price liberalisation, but they claimed that production cost more than government estimates.
“We agree with the overall scheme, but the government should not ignore our rights. The cost price set by the ministry is unrealistic,” said Farag Wahba, head of the Cairo Bakery Owners Division at the Egyptian Federation of Chambers of Commerce.
Wahba told Al-Ahram Weekly that the Ministry of Supply had set the production cost of 1,050 loaves produced from 100 kg of flour at LE80, which he said was unfair to bakeries. The cost price should be LE120, he said, and the bakery owners were therefore demanding a price of LE0.4 a loaf rather than the proposed price of LE0.34.
The bakery owners also had other reasons for demanding the higher price. According to Wahba, because of shortages of diesel fuel bakery owners are having to pay higher prices on the black market. The prices of ingredients such as salt, bran and water had also gone up, he said.
Wahba said bran prices had risen from LE10 to LE80 per 45kg. Wages had also increased, adding to the burdens on bakery owners. A baker who used to earn LE100 per day was now earning LE200, he said.
While some bakery owners may have good reasons for demanding the higher price, the government has accused others of selling subsidised flour on the black market rather than using it to produce bread.
In an attempt to find a solution that would satisfy both parties, representatives of the owners met with the minister of supply and internal trade to discuss the cost price of bread under the new system.
Wahba, who attended the meeting, said that “the minister did not respond to our demands, but he promised to review the cost price every three months. But I do not expect increases in the cost price, because the minister did not seem to be convinced by our arguments.”
Bakery owners complained of another problem when the system was applied in Cairo last week, with Wahba saying that the government had not committed itself to the new contracts.
According to the new system, the government should pay the difference in bread prices on the day after the bread is sold to consumers, but this has not been happening. “We have been applying the new system for five days, but we have not received any money. How can we go on working without receiving our due,” Wahba asked.
Some bakery owners are calling for strikes and sit-ins, hoping that the government might respond to their demands, but the ministry has announced that it intends to push through the new scheme regardless.
To make up for bread shortages caused by strikes, the government is using state-owned bakeries, as well as bakeries run by the Armed Forces and the police, to produce and distribute bread in areas where shortages have occurred.
According to experts, the new system contains loopholes. Anwar Al-Nakeeb, a professor of management at the Al-Sadat Academy, said that the move would be counter-productive unless smart cards or coupons were introduced to distribute bread to individuals.
The current distribution system through outlets near bakeries was corrupt, he said, and it would negate the benefits of price liberalisation.
To overcome the expected distribution problems, the government plans a second phase in which bread will be distributed in cooperation with the ministries of communications and information technology and administrative development.
Each Egyptian citizen has a national ID number, and this will help to ensure that bread is delivered effectively to the head of each household. Distribution based on ID numbers is designed to help prevent bakery owners or any other party wishing to trade in subsidised flour from exploiting the system.
A feasibility study is being conducted to determine if the process can be mechanised, and a pilot scheme is expected to begin in Fayoum governorate, this being rolled out to the rest of the country after technical and logistical problems have been identified.
The government has kept bread prices unchanged since the 1980s, due to a policy of intervention designed to stabilise the price of subsidised bread. It also imports massive amounts of wheat in order to produce the country’s needs.
Bread subsidies in the 2012/2013 budget are expected to reach LE16.2 billion.

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