Bread price decision soon

The government is likely to accede to bakers' demands and grant them subsidies to make up for the expenses they have been incurring rather than let them raise the price of bread, sources said yesterday.

The bearing higher bread prices would have on the retail price index, and the effects a higher RPI on the introduction of the euro is what is behind the government's likely decision, sources said yesterday.

Bakers prefer the subsidy to raising the price of bread because every price rise has been accompanied by a drop in demand.

Contacted yesterday, Competitiveness Minister Censu Galea said the government was assessing a report drawn up by the Consumer and Competition Division about the expenses bakers were facing and Cabinet would shortly decide whether to grant a subsidy or allow a price rise.

Karmenu Micallef, president of the Bakers' Cooperative, said when contacted that unless the government was prepared to commit itself to give bakers the equivalent of Lm1 per sack of flour they have processed since last May, and that talks will continue on the higher expenses they incurred since May, the price of bread would go up as of Monday.

"The price would be 21c for a big loaf and 13c for a small one," Mr Micallef said.

"A rise in price is instantly reflected in a drop in demand. Some 700,000 loaves are baked every week. Double that amount was consumed 25 years ago," he said. Mr Micallef argued there was an anomaly in the sense that while the price of bread is fixed by the government the price of flour is not.

The bakers have another grudge: They want subsidies to be given only to the 160 members of the cooperative rather than to the 180 bakeries, some of which had set up shop recently and do not only bake Maltese bread.

"If the price of Maltese bread is controlled, the licences should be controlled too. One cannot import a bus and start operating a route, and the same should hold for bakers.

"If the government has lost control over the licences, then the price of bread should be liberalised," Mr Micallef argued. Bakers are unwilling to be bound with long agreements related to price increases.

"The government was unable to make a hedging agreement for oil, so how can we be bound with prices till 2008 as they are trying to do," he asked.

"When taking into account the increases in the price of diesel, the electricity surcharge, fuel and flour, since May, all of this has added up to an additional increase of 23c for every sack of flour we process," he said.

"If the government is prepared to commit itself that it would maintain the costs we had last year, we will commit ourselves to maintain prices," he said. Mr Galea, however, did not mince words about what would happen if the bakers increased their prices on Monday.

"The law on price orders is very clear and we would be constrained to take legal action.

"My advice to bakers is to be patient for now, as they have been so far, and bear the brunt for just a little bit more and do things correctly. The decision about the way forward is imminent," he said.

Sources said the report drawn up by the Consumer and Competition Division showed bakers were justified in their claims for an increase in the price of bread.