Last week the government announced that the new smart-card system for the distribution of subsidised bread will be applied in the Cairo neighborhoods of Maadi, Helwan, Tora, Tibeen and New Cairo. Under the system, those registered for ration cards will receive 150 loaves of bread per month at a price of five piastres per loaf. The purchases will be tracked electronically by smart cards, and those who do not consume their full quota can accumulate points on their ration cards that can be used to purchase other subsidised foodstuff like sugar, rice and cooking oil. Bread distribution through smart cards has already been applied on a pilot basis in the Suez Canal cities of Port Said and Ismailia. According to Khaled Hanafi, Minister of Supply and Internal Trade, the plan succeeded in reducing flour consumption and thus subsidy expenditures by 30 per cent. In Cairo, the ministry has urged residents of the districts concerned to register for ration cards and to collect smart cards from their local supply bureau. Documentation including national identification cards for adults and birth certificates for children need to be submitted, and those eligible will receive coupons to buy bread until their new cards are issued. Hanafi said that the new programme did not aim at reducing the amount of money allocated for bread subsidies, but rather to upgrade bread production. Instead of subsidising purchases of flour, the government aims to switch to subsidising bread. Bakers will be required to buy flour at market prices, the government purchasing their bread at 35 piastres a loaf and reselling it at the subsidised price of five piastres. In applying the new system the government is hoping to reduce waste at all stages of the supply chain. Hanafi estimated that each year some 20 to 25 per cent of the state's LE21 billion bread subsidy budget was wasted. Anwar Al-Naqeeb, an assistant professor of economics at the Al-Sadat Academy for Management Sciences, said that the system could not yet be evaluated since the Port Said pilot programme had operated on a small scale. However, the new system should guarantee that subsidised bread reaches the poorest sections of the population, he said. “Bakeries will improve their production since consumers will prefer to buy from bakeries that produce high-quality bread,” Al-Naqeeb said.
However, Gouda Abdel-Khalek, former minister of supply and internal trade and a professor of economics, had reservations about the new system. Under the new program, the weight of a loaf will be reduced from 130 grams to 90 grams, while the subsidised price will remain at five piastres, which means an increase in the real price of almost 25 per cent. Abdel-Khalek said that the new system would not achieve social justice as it limited the daily quota per individual to five loaves, compared to the old system where beneficiaries had the right to open quotas. Moreover, “there are poor families who do not have ration cards, and the bureaucracy will prevent them from getting them,” he said. The ration-card system should be revised to ensure that the holders of the country's 18 million ration cards deserve the subsidies, according to Abdel-Khalek. Some bakeries would not be able to buy flour at market prices before receiving payments from the Ministry of Supply, he added. For decades, the subsidy programme has allowed citizens to purchase virtually unlimited quantities of “baladi bread” at five piastres per loaf. The loaves of flat bread play a crucial role in keeping a large number of Egyptians fed. However, the programme has led to waste and corruption since it has many loopholes. Flour for subsidised bread is sold to bakeries at LE160 per ton, compared to market prices of around LE2,000 per ton. Abdel-Khalek said that the huge discrepancy in prices, combined with lax procedures to track how much subsidised bread was actually sold to the public, had led to a lucrative parallel market in smuggled subsidised flour. Low prices have also contributed to waste on the consumer side, including farmers using subsidised bread to feed poultry.
