– During the past few days, the Ministry of Supply announced that from the beginning of November, the prices of supply oil would be raised, so that the price of a liter would remain around 25 pounds instead of 21 pounds, and the price of an oil bottle of 800 ml would rise from 17 to 20 pounds.
This is the second increase in the prices of supply oil this year, because the government had previously raised the price of a liter bottle from 17 pounds to 21 pounds, last June.
Of course, the head of the Oils Division in the Chamber of Food Industries in the Federation of Industries says that the division is studying an increase in oil prices after the Ministry of Supply decided to raise the price of a bottle of oil.
– Of course, these are very large increases that only happen once, and the government says that it is because of the high prices globally and the high cost of shipping, and according to the Minister of Supply, this means that citizens must bear the burden of this inflation with the state.
– We will try to understand together what is the reason for these recent rises? Do we really have to bear it with the government? What was the alternative?
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What is the reason for the recent rises?
– When we look at the amount of the increase in the oil price, we will find that in the case of a liter, it has increased by 4 pounds in full, which means about 19%, and in the case of 800 milliliters, it has increased by 3 pounds, which means about 17% of the increase.
On average, we can say that the oil increased by an average of 18%, and this means that according to the ministry, which says that there must be a sharing of burdens between the citizen and the state.
– But with regard to the level of oil in the supply, we will find that, on average, it has increased by only 10% (according to the Food Industries Bulletin from Economy Plus), and it is assumed that this remains more affected by international prices.
The prices of corn oils, for example, increased by 2,500 pounds per ton, reaching 26.5 thousand pounds, after it was in the range of 24 thousand pounds, and the prices of “the first” oils increased by 1,300 pounds per ton, reaching 22 thousand pounds.
– Therefore, the large percentage of raising edible oil may be unjustified, with evidence that the mechanisms of the local market, which also depend on international prices, do not have the same percentage.
– Minister Ali Moselhi also said that he raised the price of supply oil due to the high costs of international transportation and shipping after the increase in energy prices globally, and said, “The counter that came from China for 1400 dollars, today it became for 14 thousand dollars.”
– Far from, of course, that the 50% increase in shipping prices is impossible to produce a 10-fold increase in the price, and far from the fact that the presenter interlocuting him on the phone, who is Amr Adeeb, did not ask the minister for clarification about this, and what is impossible talk means economically, but let us think A little more in shipping prices, is a 50% increase in them supposed to raise the price by 18%?
Overall, I mean, if we assume that this shipping cost represents, on average, 20% of the cost of importing a ton of oil. Because, literally, you bore the entire cost of the extra freight for the citizen, and you did not share it with the state.
– Of course, this is in addition to an important thing, which is that we do not import large quantities of ready-made oil from the outside, and therefore local manufacturing takes place, and it is assumed that the effect of this manufacturing equals or reduces our link (even if partially) to global price increases, including the shipping price.
– Of course, we will not forget that the second increase is within 5 months, at about 8 pounds over twice (which is a very huge number).
– Egypt annually imports about 95% of its needs of vegetable oils annually, mostly in its raw form and then liquefied locally. Egypt imports about 5.7 million tons of oils and oilseeds annually, 2 million tons of which are oils, and 3.7 million tons of seeds, at a total cost exceeding 25 billion Egyptian pounds, according to estimates by the Oil Crops Research Institute. I mean, we are about half of the time that we import seeds, not ready-made oils.
He works in the production of edible oils in Egypt, 4 companies affiliated with the government-owned Food Industries Holding Company, which are Alexandria for oils and soap, Tanta for oils, soap and natural water, and the Sphinx for oils and detergents (formerly salt and soda), and Nile for oils and detergents.
These companies produce edible oil, including mainly refining processes, in addition to some oilseed pressing processes.
According to a statement issued by the Council of Ministers last month, the four oil-producing companies have a refining capacity of edible oil of about 1,300 tons / day, with a monthly capacity of about 40,000 tons / month of refined oil, and it covers 80% of the needs of the supply system.
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Do we really have to bear with the state?
We are fully aware of the idea that the demand for vegetable oils has increased strongly in the recent period from East Asian markets in particular, since the time of the spread of the “Delta” mutator in many countries, with increased shipping costs and a somewhat reduced supply.
– But the idea put forward by the minister is a very dangerous idea, which is that the citizen must bear with the state the rise in food prices globally, and this is a very sensitive idea because the citizen who is eligible for support pays indirect taxes on salary, value added and other fees and taxes because this support system provides him Relative protection from price hikes mainly.
– Therefore, it is assumed that the subsidy system protects people from price inflation. The state does not share with them after the tax revenue raised this inflation. Otherwise, what is the subsidy crisis?
– In addition, of course, because the price of an average bottle of oil, meaning in the free market, is currently about 30 pounds per liter, literally means the state pays 5 pounds, a price difference. Sincerely, which is, by the way, an impossible assumption.
– It makes sense that the state or the Supply Commodities Authority is now at the current market price, and if you buy good oil directly from the market, you will get it at least 3-4 pounds less than the market price because the government will remain one of the largest buyers of oil in Egypt, so we can literally say that it is the government with price increases The latter may not subsidize the oil, but sell it at cost to the citizen only.
– Another important thing and an important question regarding any need related to support. This means how much it costs, because the state begins to reduce support like this, and let us take it with an example from the ground. The state subsidizes the individual with 50 pounds per month, which means a bottle of oil, 2 kilos of sugar and a kilo of lentils.
So, for example, the card for 4 people, the value of its subsidy is 200 pounds (8 kilos of sugar – 4 bottles of oil – 2 cans of margarine) or (8 kilos of sugar – 2 kilos of rice – 4 bottles of oil – 8 bars of soap – 16 sachets of salt)
Raising the 4 pounds per person per month in the oil bottle saves the state about 280 million pounds per month, assuming that it spends 70 million oil bottles per month and that all those registered in the ration cards spend their own oil.
– This means that 3 billion pounds are saved this year. Is 3 billion pounds a big number? You can see it as well, but the 3 billion countries are nothing in the country’s budget, almost less than 0.002% of annual expenses, countries are less than less than 1% of the cost of the express train, which will cost 360 billion pounds, and they may be the cost of building a long road, some of the roads that we see every The day you use this.
On the other hand, raising the 3 billion dollars from families at a rate of 4 pounds per month will greatly affect the budgets of the families of many low-income and poorer groups in Egypt, because if a family has 4 members and it takes 4 bottles of oil per month, this will allow it to supply its consumption of oil from the market Al Hurra because the Egyptians consume more oil than the supply oil. Almost a family like this can also buy 2-3 ounces of oil more than the market, about 100 pounds more.
In a country where a third of the population is below the poverty line, which is approximately 840 pounds, this figure is about 10-12% of the family’s consumption and it is very impressive.
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What is the alternative?
We must point out a very important need, which is that the Egyptians’ high consumption of vegetable and hydrogenated oils is a danger to the health of Egyptians because these oils have a direct relationship with chronic diseases such as obesity and diseases of pressure and heart, and others, and over time require spending more on health than these families.
– But also, we must understand that food saturated with oils is a behavior of the poor to adapt to poverty, because people do not simply have money with them. They eat things other than these things, such as falafel, eggplant, potatoes, and all cheap foods that are very important to satisfy the hunger of millions of poor Egyptians.
– So the question is a bit bigger than raising the price, and it is related to how we can change the support system in Egypt so that it supports the consumption of more healthy foods such as vegetables and fruits, but this needs a large financial investment in the support system because the price of supporting vegetables, fruits and healthy foods is, of course, higher than the price of support Oil and sugar, which are cheap commodities in the first place.
– Therefore, if the state really wants to do a restructuring of the subsidy, this requires many needs, many of which require spending more on food support, not reducing rations, raising prices and reducing the weight of the loaf, and all the measures that are currently taking place according to the municipal logic of the “Hanatfa” in a large and important system like food support in Egypt.
Food subsidy in Egypt is a very sensitive and very important thing to keep people satiated, even if the goods are of poor quality, and their impact on health is not good.
– In the last period and during the talk about reducing bread subsidies, which by the way is still something proposed and under study by the Ministry of Supply, according to the minister, we wrote here about the importance of subsidizing bread, and we said that subsidies in general are very important to achieve food security at the individual level, especially for the third of Egyptians under The poverty line.
In an important study by the World Bank on poverty in Egypt in 2010, he said that with the crisis of rising wheat prices and global food crops, the World Bank considered that food subsidies (including subsistence) succeeded in protecting 12% of Egyptian families from going below the poverty line.
– We take into account that this was before the flotation, which caused a huge explosive inflation, 10 million Egyptians went down at least estimates below the poverty line, and before Corona and its economic effects, which by the way, in the midst of its crisis, the government reduced 30 grams of the weight of a loaf of bread.
– There are people who can tell you what the system is in which there is a lot of waste, I mean, for example, there is corruption in bakeries, although this is not the same as the first, or that people in the countryside aim to live for ducks, and that 5 loaves is a lot for people, and in fact people in the countryside use part of the daily living For ducks, this is a good thing, and recycling is important for these people, because in the end they eat these ducks, and this is not essentially the main problem.
– The same study that we mentioned above from the World Bank said that despite the dropout rates in food subsidies for those who do not deserve it or wasting it for other uses, its effectiveness is very high in feeding millions and in protecting families from falling below the poverty line. This is before all the improvements in the production and distribution system of subsidized bread, which reduced leakage.
We see that the current support system is important to maintain food security for the Egyptians. Playing with it is not in anyone’s interest, and the savings that can occur from raising prices or reducing prices are not very large, because it is a huge system that is very sensitive and has direct effects on hunger and poverty in Egypt.