Maltese loaf subsidy may go

The government is considering ditching the subsidy on the Maltese loaf as flour prices continue to soar, with the latest subvention request standing at more than three times that of two years ago.

In May 2006, the first subsidy on flour given by the government following EU accession stood at some €864,000. It has now reached €2.2 million and, should the government decide to foot the bill for the latest hike in the price of flour, the figure could shoot up to €3.5 million.

The formula, so far, has been to subsidise flour destined specifically for the ħobża, which is protected because of its traditional culinary status.

The subvention for a sack of flour went up from €2.33 in May 2006 to €4.36 in January 2007, up to €5.75 last August and then up again to €6.40 in January this year.

As a result, the Administration is considering a revision of the system that could even entail liberalisation, government sources told The Times.

The news comes in the wake of a recent announcement by Federated Mills, which import wheat for distribution as flour, that it will be increasing its prices to make up for the higher cost of the imported raw material. No date was forthcoming officially but industry sources said the company will probably raise prices next week.

Late last month, the company won a challenge before the Commission for Fair Trading against a government order that prevented it from raising the price of flour despite rising international prices last December.

Since the announcement by Federated Mills, the Bakers' Cooperative has been in talks with the government over rising costs, which also factor in soaring fuel costs and, in fact, liberalisation is being contemplated as one of the options.

The subsidy was waived in 2000, when it was substituted by a one-time Lm10 for every member of each household as a compensatory bonus.

Last summer, the issue of compensation erupted into a controversy lasting a few months until the government eventually compromised on the bakers' requests. Bakers had then threatened to stop making the traditional Maltese loaf unless the government either increased their subsidy or allowed them to raise prices per loaf by Lm0.02 following another hefty rise in the price of flour.