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(photo credit: Ariel Jerozolimski [file])
Industry, Trade and Labor Minister Eli Yishai signed an order Tuesday to cut the price of regulated bread loaves by 4 percent, just one month after the ministry approved a controversial 7% price hike.
Together with senior staff, Yishai concluded that the consumer price of the bread could be reduced 4% without causing damage or imbalance to market forces. The ministry noted that the designated price is a maximum, so retailers may sell the bread at a lower price on their own initiative.
The proposal was presented to the interministerial committee on prices of regulated products, and still requires the signature of Finance Minister Avraham Hirchson.
Hirchson himself responded unenthusiastically to the proposal, noting that it would hurt retailers' existing profit margin, which could cause shopkeepers to remove regulated bread products from their shelves.
As a result, "the population that consumes regulated bread of all kinds is ultimately liable to be hurt," not helped, he said, noting that the committee on regulated prices said in late May that it could not find an economic justification to cut into the retailers' existing profit margin.
Hirchson asked to receive the professional and economic recommendations of Yishai's staff that served as the basis for the decision, and said that only after receiving the material and allowing Finance Ministry experts to examine it, would he formulate his own stand on the matter.
Yitzhak Berman of Berman Bakeries, a major producer of regulated bread loaves, warned in response to Yishai's decision that approval of the price cut would hurt the country's bread producers as a whole, "whose profitability for the breads is very low," given rising costs of both flour and energy.
Government experts have known since November that bread prices needed to be raised by about 15%, but first stalled due to the election campaign and then eventually increased by only 7%, Berman said, arguing that the proposed cut would force bakeries to close down and fire workers.
"I call on the Finance Minister not to sign the order, to keep regulated bread prices as they are, and even consider raising the bread price due to rising costs internationally," Berman said.
The recent 7.11% price hike was announced on the even of Yishai's entry into office due to findings that the supermarket chains were unfairly demanding below-cost prices on the regulated bread products, but not passing the discount on to customers. Bakeries were found to be losing 27.4 agorot on each shekel worth of regulated bread, but somewhat compensating for losses by charging higher prices for unregulated products, leading the ministry to conclude that a 14.1% price hike was needed. To protect the bakeries, the ministry introduced rules forbidding them from selling at a loss, which it said allowed the price hike to be reduced to 7.11% instead of double that amount.
Yishai's decision to bring prices back down by 4% follows widespread public outrage over the price hike. Immediately following the controversy, Yishai had raised the possibility of reinstating government subsidies on bread.