Gov't drops price control for bread

Cost of a loaf may jump 20%.

bread biz 88 224 (photo credit: Ariel Jerozolimski)
bread biz 88 224
(photo credit: Ariel Jerozolimski)
The government on Sunday approved a temporary compensation package to assist low-income families cope with rising bread prices. It is the first step toward reforms that will transfer pricing from government control into the hands of the countries' bakeries. "This is the first time in the history of the State of Israel that the government is offering compensation for a price increase of a specific product and in particular for bread," said Industry, Trade and Labor Minister Eli Yishai. Estimates are that once bread prices are no longer under government supervision, they could increase by between 10 percent and 20%. Under terms of the temporary compensation package proposed by the Industry, Trade and Labor Ministry, a NIS 60 million one-time bonus will be divided among low-income families through their National Insurance Institute benefits for the months of August to December to compensate for the rise in bread prices. Individual compensation amounts will range from NIS 60 to NIS 180 and will be paid out on December 1 for the entire period. The package will be in place until the Central Bureau of Statistics implements a new consumer price index measuring the decline in the purchasing power of the low-income population in relation to the basket of goods. The index will serve as the yardstick to compensate for an increase in prices of bread and basic goods. Over the past few months, the Industry, Trade and Labor Ministry has been working on a compensation mechanism to put an end to the supervision of price-controlled breads, which include plain white bread, plain brown bread (lehem ahid) and regular halla - all of them sold whole or sliced. When this happens, prices of state-controlled breads, which have been under government supervision since the 1950s, will be lifted from state control. The historic measure still awaits the approval by the finance minister, but is expected to come into effect over the next few days. At the beginning of last week, the country's three largest bakeries - Angel Bakery, Davidovich Bakery & Sons and Berman's - cut back on the production of regulated breads in response to the worldwide wheat crisis and resulting hike in flour prices, which has been putting pressure on production costs.