A new system for distributing the subsidised items ration-card holders can buy is being introduced this month to tackle decades-old problems in the food subsidies system. In 2013/2014, food subsidies amounted to LE32 billion, two-thirds of which went on bread while the rest was allocated to the ration-card system. According to the new system, ration-card beneficiaries will have the right to choose from a variety of products instead of a monthly quota of certain commodities. Under the old system, consumers only had the option of buying poor quality rice, sugar, and cooking oil, but Minister of Supply and Internal Trade Khaled Hanafi, who retained his position after Egypt's new president Abdel-Fattah Al-Sisi took office in June, said the list of items available for purchase would be expanded first to 20 and then to 100 commodities within the next few months. Meat and poultry will be among the new products on the initial list. The government is providing these products in cooperation with the state-owned Holding Company for Food Industries at 20 to 30 per cent discounts. Currently, those having ration cards can get LE15 worth of subsidised commodities free of charge each month. LE15 is the value of the food subsidy per individual, according to estimates from the ministry. For years, consumers have complained of the poor quality of products sold through the ration-card system, and according to official promises the new system will provide high-quality products at reasonable prices. However, Mohamed Abu Shadi, a former minister of supply and internal trade, told Al-Ahram Weekly that it would be better if the new system was optional for consumers since there were a lot of poorer people who cared about quantity rather than quality. Another problem mentioned by Abu Shadi was that people were not acquainted with the new system. “Some people read the news as a step towards cancelling the ration cards system in July, since there is not enough information being published,” Abu Shadi added. The new system will be applied through 25,000 grocery shops across the country, but Abu Shadi said that these shops were not well enough prepared to implement the new system. “These small groceries do not have enough space or refrigerators to receive the poultry and meat included in the new system,” he said. Amr Asfour, Deputy Chairman of the Food Commodities Division at the Cairo Chamber of Commerce, said that the decision would have a positive impact in reducing the waste of subsidies because the current system “had many loopholes that help corruption.” “Some individuals collect billions of pounds from loopholes in the subsidy programme. But the new system will guarantee that the subsidies go to the poorest people,” he said. Asfour explained that the new system widened the range of goods offered to consumers while not increasing the value of the subsidies they are used to getting. Moreover, it helps to put an end to the double pricing of commodities. The price of cooking oil is LE3 per litre under the current ration-card system, but is sold at LE8 in markets. Sugar is sold at LE1.25 per kg, compared to LE4.5 at supermarkets. However, Asfour added that unless the value of LE15 per month for an individual was raised every year according to inflation it would be meaningless. The government should exert efforts to raise people's incomes while reducing food prices in order to be able to put an end to the subsidy programme without harming poor people, he said. The prices of products sold in groceries should be less than market prices as sugar would be available at LE4.5 per kg, rice at LE4 per kg and cooking oil at LE7.5 per litre. However, Kamel Fekri, a grocery owner in Nasr City, said that he did not understand the new system and had not received instructions from the supplies administration. “In fact I have no idea if I will be able to receive products according to the new system,” he said. To help grocery owners implement the new system, Asfour said they would be provided with credit for two weeks, allowing them to build up stocks and then repay the ministry. To implement the new system the government also needs to finalise the introduction of the smart-card programme. According to the ministry of supply and internal trade, only 500,000 families out of 18.2 million holding subsidy cards still use the old paper cards. In April, the Ministry of Supply launched a smart-card system for subsidised bread distribution. This system, now operational in several governorates, is intended to reduce fraud. Ration-card holders get five loaves of subsidised bread per day under a point system, allowing those who consume less than the quota to spend their savings on other foodstuffs. The points can be used to purchase foodstuffs available at 25,000 privately-owned grocery stores around the country partnering with the government in the programme. The system aims to raise incentives for people to buy only as much subsidised bread as they need, helping to reduce spending on wheat, of which Egypt is the world's top importer. Hanafi said last month that the reformed system had so far reduced bread consumption by 30 per cent in the Suez Canal city of Port Said where the pilot plan began. “Motivation was needed to bring down consumption, so we came up with a system to give citizens points for the bread they do not use,” Hanafi told a recent meeting of local businessmen in Cairo. “If a family's needs of bread, for example, are below the fixed amount, it can use the difference in points to meet other needs for free,” he added. One cash-strapped government after another has resisted tackling problems in the subsidies system, fearful of a backlash from the public. President Al-Sisi spoke cautiously about subsidies during his electoral campaign, saying that reform would happen gradually but urging people to prepare to make sacrifices and apparently laying the foundations for a period of economic austerity.Energy subsidies will be subjected to further reform through price hikes and other measures. Food and energy product subsidies have traditionally eaten up around a quarter of the state's budget, which ended the current fiscal year on June 30 in a deficit of 12 per cent of economic output. Through its reforms, the government hopes to liberalise prices completely over the next three to five years.
