Economy and Trade Minister Naftali Bennett on Wednesday announced that he was planning on lowering import taxes on a basket of dairy products including butter and yogurt by 80%.
"We are continuing to open up the economy and bring down prices," Bennett said. Currently, customs on some dairy imports stands at over 100%, he said. The reduced customs rates will have quotas, which Bennett says will help the small companies increase their grip in the import market and increase competition.
"I expect the reduction in customs will be passed on to consumers," he said.
The full list of reduced quotas, which will apply to retail-packaged butter, concentrated and non-concentrated milk and cream, buttermilk and yogurt, will be published in the coming days.
The policies are based on recommendations of the "Locker guidelines," the government's committee on dairy reforms.
The dairy market in Israel is a complex trap of protectionism and regulation. The government regulates the price of dairy and outlines quotas for small dairy farms, who typically sell their product to one of three large manufacturers: Tnuva, Strauss, and Tara.
Tnuva on its own controls some 70% of the dairy market, and is considered a legal monopoly by the Israel anti-trust authority, which also has regulatory power to try and prevent it from price gouging.
Although Israeli agricultural technology has made its cows the most efficient dairy producers in the world, the combination of high tariffs, quotas, price regulation and Israel's geographical isolation from other dairy producers has led to a situation in which its dairy prices are higher than most OECD countries.
Dairy is a controversial issue for the Israeli public. In 2011, skyrocketing cottage cheese prices set off a wave of boycotts that helped build momentum for the summer protests on the cost of living.
On Tuesday, the Knesset Economic Affairs committee voiced opposition the possible sale of Tnuva to China's state-owned Bright Foods corporation, arguing that the fate of Israel's dairy industry should not be in foreign hands.