Describing the current bread distribution system as a “failure” as it wasted 20-25 per cent of the bread subsidy budget, the newly appointed Minister of Supply and Internal Trade Khaled Hanafi this week revealed a plan to restructure it. “The current system allows bakery owners to smuggle flour and sell it in the black market at higher prices,” Hanafi said during a recent press conference. He stated that his ministry was “at war” with the subsidised flour-smuggling “mafia”. Hanafi said that around LE7 million of the current subsidies bill was wasted yearly due to smuggling. The Port Said governorate, which has 76 bakeries making subsidised baladi bread, would see the introduction of a plan in April to distribute bread according to a new system. This will then be introduced in other governorates over the following three months. Under the plan, the amount of money allocated for bread subsidies will not be reduced, but bread will instead be distributed according to the smart-card system that the government has already introduced for fuel in an effort to address shortages and combat smuggling. According to the new system, the government will no longer sell bakeries subsidised flour. Instead, bakers will buy flour at the market price and sell bread to consumers using smart cards. They will then be reimbursed according to the data provided through the smart-card system. The new system would benefit all those involved, Hanafi said, since consumers would be able to buy bread easily using smart cards at a cost of five piastres a loaf. Bakers would receive their financial reimbursements immediately thanks to the new technology, and the government would be able to control the amount disbursed. To make it easier for consumers who don't yet have smart cards, ministry of supply inspectors will be on hand to sell bread on the basis of existing ration cards. Hospitals and orphanages will also receive smart cards for their daily quotas of bread. The quota of bread for each family will be calculated through a system of points. If a family does not receive its entire quota, it will be able to exchange any remaining points for other subsidised commodities. Ahmed Abdel-Meguid, an employee and the father of two children, said that selling subsidised bread through smart cards was a good idea since it would prevent the smuggling of flour by bakery owners and their selling on subsidised bread to restaurants and fast food stores at higher prices. He added that bakers had been able to cheat the authorities because consumption data had been hard to find. But now “each citizen will not get more than his quota. Some people used to go to bakeries and get large quantities of bread to feed to poultry, which is unfair because the government does not provide subsidies for poultry but for human beings,” he said. Hamdi Abdel-Azim, former chairman of the Sadat Academy for Administrative Sciences, told Al-Ahram Weekly that the new system would fight corruption. Smuggling subsidised flour was a serious problem that the government had tried for years to end, he said. “To overcome the smuggling of subsidised flour the government should give bakers the real cost price of the bread in addition to a reasonable profit margin,” he added. The current price paid by the government to bakers is LE80 per 100 kg bag of flour. The real cost, according to Abdullah Ghorab, head of the Bakers Division at the Federation of Chambers of Commerce, is LE130 as this includes the cost of labour and other expenses. But the Ministry of Supply and Internal Trade had refused to raise the price, he added. The gap between the actual cost and the price paid by the government had forced bakery owners to sell subsidised flour on the black market. Ghorab added that the ministry had used to pay only LE55 for each 100 kg bag and had delayed payment of the remaining LE25. Bakers had not received their remaining dues since July 2013, he said, which had caused problems for the industry. Representatives of the country's bakers met recently with the minister of supply and internal trade and agreed to apply the new system. “During the meeting with the minister, the bakers agreed to apply the new system though we have some reservations about it,” Ghorab said. He added that the new system was good in theory, but problems were expected in practice, including the failure of smart-card reading machines. It would be better, he said, if each bakery had a certain quota of subsidised flour and delivered a certain number of loaves of bread which would be calculated by smart card. To provide subsidised bread, Egypt annually imports about 10 million tons of wheat, making it the world's largest wheat importer. This is in addition to buying another 3.6-3.7 million tons from local farmers. The subsidy programme provides bread at five piastres per loaf, a state-regulated price unchanged since 1989 and equal to a seventh of the real cost. Egypt's food subsidy bill is estimated at LE30 billion in this year's budget.
