Rewritten Title: Navigating Economic Stability: The Government’s Balancing Act on Bread Subsidies
Article:
A Crucial Intervention for Market Stability
A swift resolution from the Planning and Budget Organization, as directed by the President, to allocate resources for baker subsidies is seen as a key step toward resolving current market tensions. Expediting these payments would address bakers’ primary grievance regarding financial imbalance and effectively remove any justification for selling bread above official prices.
The Root of the Disruption
The core of the issue is identified as the multi-year lag of bread prices behind inflation. To cushion consumers from rising costs and maintain stable bread prices, the government had been providing financial assistance to bakers. However, the discontinuation of these subsidy payments at the start of the current Iranian fiscal year (late June) significantly disrupted the bread market’s equilibrium. Faced with rising production costs and the non-payment of the promised support, many bakers, particularly those producing traditional Barbari and Sangak breads, state they are no longer able to sustain their businesses while adhering to the official price list.
Subsidies Halted, Concerns Mount
Detailing the situation, Mohammad Javad Karimi, Head of the Bread and Flour Working Group at the Iran and Tehran Chamber of Guilds, confirmed that from the beginning of the summer, no subsidy payments have been made to bakers. This, he noted, has intensified dissatisfaction within the trade and led to an increase in pricing violations. He elaborated on the price-setting process, explaining that while their analysis indicated a need for over a 100% price increase with the cessation of subsidies, an agreement was reached for only a 52% increase. The difference was to be covered by continued subsidy payments—a commitment that has yet to be fulfilled.
Karimi referenced extensive correspondence with the First Vice President, the Governor of Tehran, and relevant ministries, confirming that the matter now rests with the Planning and Budget Organization. He added that the President has also instructed the organization to ensure these payments are made.
The Subsidy’s Role and the Debt Question
The baker subsidy is calculated as 40% of a bakery’s daily sales based on a benchmark price. This mechanism functions as an indirect subsidy to the public, preventing a direct and sharper increase in the price of bread. Reports indicate that substantial sums have been allocated through this channel over the past three years, with current monthly obligations estimated to be significant.
Karemi emphasized the government’s choice: either disburse the subsidies on time or allow bread prices to be set at a realistic, cost-covering level. “When the real price is not granted,” he stated, “neither quality can be maintained nor violations reduced. We do not expect an illogical increase; we just want a realistic rate proportionate to the costs.” He clarified that even with subsidy payments, operational costs are not fully covered, but violations would decrease.
Unsustainable Operations for Traditional Bakers
The delay in payments has placed particular strain on bakers of Barbari and Sangak bread. Karimi pointed out that these units often rely on more manual labor and face higher costs, making the production of each loaf at the official price a loss-making endeavor. He suggested that under these circumstances, it is difficult to expect strict enforcement of price regulations when the bakers’ rightful dues have not been settled.
This situation follows a recent agreement for a 52% price increase, intended to be balanced by the subsidy payments to shield both the public and the bakers from financial pressure. The continued delay in fulfilling the subsidy pledge, however, leaves bakers reporting ongoing losses and challenges in maintaining their vital trade.