Egypt bakeries protest planned reduction of flour subsidies

Ahram Online , Sunday 17 Mar 2013

Egyptian bakers and bakery owners protest government decision to significantly raise price of flour used to produce subsidised bread

A woman sells bread at a bakery in Cairo March 17, 2013 (Photo: Reuters)

Hundreds of Egyptian bakery owners on Saturday blocked Cairo's Qasr Al-Aini Street near the Ministry of Supply and Internal Trade to protest government plans to reduce flour subsidies. 

On Thursday, the supply ministry announced that it would continue to subsidise bread loaves, but not flour – which would henceforth be sold to bakeries at market prices. The move means that prices paid by bakeries for a 100-kilogram bag of flour would rise from LE16 to LE286.

The government will then purchase loaves of bread from bakeries for 34 piastres each before selling them on to consumers at 5 piastres each. 

Saturday's protests were not the first of their kind. After the ministry announced the new arrangement on Thursday, bakers from north Cairo prevented government trucks from distributing flour to local bakeries. 

Protesting bakers and bakery owners say that, while they oppose the new price structure, they don't oppose the overall subsidy reduction scheme.

"We agree with the principle of the new system, but not with these conditions," said Abdallah Ghorab, head of the bakery owners division at the Egyptian Federation of Chambers of Commerce.

"We have long called for the liberalisation of flour prices and the entire system of bread production," Ghorab added. "But with its latest decision, the government is setting an unrealistic production cost."

The supply ministry puts the production cost of 1050 bread loaves (produced from 100 kilograms of flour) at LE80. Bakeries, meanwhile, assert it is closer to LE120. Bakers are therefore demanding 40 piastres for each loaf of bread rather than the proposed 34 piastres.

"We can't afford these prices," said Ghorab. "We'll take losses."

During the first 100 days of President Mohamed Morsi's term in office last year, bakeries were promised that estimated bread production prices would be increased gradually to some LE100 (per 1050 bread loaves). This did not happen, however, and only the liberalisation plan remained in place. 

The government has often accused bakeries of selling subsidised flour on to the black market rather than using it to produce bread.

"Some bakery owners are calling strikes and sit-ins in hopes of seeing the new system fail, so that the old system – which allowed them to sell large amounts of flour on the black market – would be maintained," Nasser El-Farrash, advisor to the supply minister, said recently.

El-Farrash went on to assert that the ministry would nevertheless push through with the new plan.

According to Ghorab, bakery owners plan to hold a meeting on Tuesday to formulate their demands and open talks with the government.

The Egyptian government has traditionally kept local bread prices down by both importing and purchasing massive amounts of locally-produced wheat and supplying state-sponsored bakeries with flour to produce needed quantities of bread. 

Local bread prices have remained unchanged since the 1980s due to a policy of frequent government intervention to stabilise subsidised bread prices. Until now, the local price for a loaf of bread remains about 5 piastres. 

Last year, several Egyptian governorates suffered temporary bread shortages. Many Egyptians remain unable to buy subsidised bread on a regular basis, since the bakeries that produce it remain uncommon in many rural areas.

Total bread subsidies in Egypt's 2012/13 state budget are expected to reach some LE16.2 billion. 

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