No Rise in Bread Prices, But at What Cost?

EghtesadOnline: The last time the country experienced a rise in retail bread price was in November 2014.

News ID: ۷۸۳۲۶۱

14 July 2018

Despite the soaring costs, bakers say, the government does not allow any increase in bread prices. Last year’s directive by Market Regulation Headquarters authorizing a 15% rise in bread prices only lasted for a day, as President Hassan Rouhani ordered Iran’s Chamber of Guilds to halt the rise in bread prices.

Bread is a main item in Iranian households’ consumer basket—a sample of consumer goods and services used to track prices—particularly the consumer basket of households in low-income deciles, the pricing of which is a highly controversial issue. Therefore, the government is unwilling to take on the political cost of raising bread prices.

On the other hand, the result of keeping bread prices unchanged for more than three years has sacrificed quality and reduced its size, the so-called shrinkflation, or what business dictionaries describe as hidden inflation: Product quality or quantity that decreases while their price remains the same, Financial Tribune reported.

Over the past weeks, representatives of bakers’ unions of provinces met with Minister of Industries, Mining and Trade Mohammad Shariatmadari as the head of Market Regulation Headquarters and voiced their complaints in this regard, the head of Iran’s Chamber of Guilds, Ali Fazeli, told the Persian daily Iran.

Referring to a taskforce set up at the headquarters to address the possibility of reducing bakeries’ costs, Fazeli said, “As raising bread prices to cover the costs of bakeries is not an option, we have suggested alternatives, including reducing the prices of energy carriers, moderating employers’ insurance premium and reducing tax for the workforce.”

Fazeli said bakers are in dire straits and so it is tough to maintain the quality of bread.

Mohammad Reza Mortazavi, the head of Flour Producers Association, said costs other than flour prices account for 60% of bread-making costs.

“Since the Iranian year 1393 (March 2014-15), costs of bread production have risen by about 40%. The only way to solve bakers’ problem is to make prices competitive. The government could remove the subsidies it grants to flour and bread, and instead pay cash subsidies to the low-income people. Stabilizing prices is an inefficient policy,” he added.

On lack of supervision to ensure the quality of bread, Mortazavi said, controlling prices is the only thing followed in Iran.

“There is no control over the quality of bread. Most bakeries use baking soda instead of leaven as it is cheaper. Each kilogram of bread must have a 600-gram dough and be priced at 12,000 rials (about 28.5 cents). As we speak, you cannot find a loaf of bread at this price,” he said.

“Loaves weigh lighter and each kilogram of bread is priced under 20,000 rials (47.6 cents), indicating that bread is both more expensive and of low quality.”  Ahmad Aqabeigi, an expert of bread and flour market, thinks differently. “The dough for each loaf of bread was supposed to weigh 500 grams, but now it is 300 grams. By making specialty bread, those which are made with sesame, bakers raise the prices and cut losses, if any. I wonder why the number of bakeries has increased from 4,000 to 8,000 over these years, if running a bakery was a floundering business,” he said.

According to Qasem Zera’atkar, the head of Traditional Bakers’ Union, there are 20,000 bakeries more than the country needs and they waste considerable resources by using substandard bread-making methods. Over 72,000 licensed bakeries are operating in Iran, of which 80% receive government subsidies and the rest buy flour at market prices.