Supply Ministry introduces new penalties for bakeries, mills amid changes to bread subsidy system

Supply Minister Sherif Farouk imposed new regulations on the production of subsidized bread this week, introducing fines for bakeries and mills found to be in violation of ministry-set standards.

The step comes as the government moves to tighten controls on what is left of the national in-kind subsidy system — a social support framework guaranteeing access for price-controlled essentials such as bread, cooking gas and fuel.

The government has slowly trimmed back the provision of subsidized goods, taking steps earlier this year to increase the cost of subsidized bread for the first time in 30 years, claiming at the same time that the system has weighed heavily on the national budget and become open to profiteering by black market traders. 

Some bakeries resented the step, expressing frustration with the degree of government provision to cover their costs which they say has not matched the rate of inflation affecting inputs. 

Supply Ministry spokesperson Ahmed Kamal told Mada Masr that the decisions are within the ministry’s rights as part of an effort to recalibrate the system.

The decree imposes penalties on bakeries found to be in violation of standards including loaf weight, quantity or quality of flour type, and the use of scales meeting regulatory specifications. 

Other violations include assaulting supply inspectors, non-compliance with imposed penalties, failure to adhere to working hours, unauthorized closure and selling bread without ration cards.

According to Supply Ministry Decision 175/2024, of which Mada Masr obtained a copy, fines start at LE500 for issues like cleanliness violations, incomplete bookkeeping or failing to use official stamps. Fines of LE1,0000 can be levied for infractions related to working hours or the absence of proper bread dispensing devices. Higher penalties could see bakeries lose their licenses, have reduced access to subsidized flour for several months, or be charged fines worth double the equivalent value of the government’s subsidy to the bakery on the day of the violation.

Mills will also face new penalties under Supply Ministry Decision 30/2024, also issued on Tuesday. The punishments range from a 10-50 percent deduction of total subsidy per day that is paid to mills for periods of up to 15 days, to a month-long closure of the mill.

The directive attempts to list violations related to non-compliance with standard specifications for flour, wheat and bran samples, the presence of pest infestations, technical issues with milling equipment and damage or mismanagement of bran stocks against Supply Ministry guidelines.

Five sources from the bakery and milling sectors told Mada Masr that the minister's decisions came as a surprise, noting that the ministry did not consult them beforehand.

While some sources thought it was fair to impose certain provisions, critics of the decisions said the new rules leave them feeling like they’re operating "under threat," especially as they continue to grapple with what they described as the unjust costs of subsidized bread production imposed by the ministry at the start of the current fiscal year.

In June, the ministry raised the value of the monetary support it provides bakeries to produce subsidized bread by 25 percent. Bakery owners had been pushing for a 65-percent increase to compensate for the increased cost of supply inputs from fuel to yeast. 

The ministry’s increase was the first it has made in four years, and brought the amount the government pays to subsidize bread production from a 100 kg sack — used to produce 1,450 loaves — to LE380, whereas bakers sought an approved price of LE500 per sack. 

Under the current subsidy system, citizens pay LE0.2 per loaf to the bakery owner, with the government covering the remainder of the cost.

Abdel Ghaffar al-Salamoni, vice president of the Grain Industry Chamber at the Federation of Egyptian Industries, told Mada Masr that routine inspections of mills and bakeries, along with weight monitoring, are fair measures that ensure oversight.

Pests, such as weevils, in the flour, however, are not the responsibility of mills, Salamoni said, arguing that such issues originate at the point of supply. "Mills are constantly fumigating and spraying. These pests aren’t our responsibility — they come from the silos," he said.

The Bakeries Division scheduled a meeting for Thursday to discuss Farouk’s decision and invited him to attend. At the time of writing, industry sources and a ministry source said that Farouk had not indicated whether or not he would accept or decline the invitation.

The ministry’s spokesperson said that the ministry periodically reorganizes its operational framework based on reports from various agencies, including the General Administration of Supply Investigations, supply directorates and the Consumer Protection Agency, all of which monitor on-the-ground conditions.

He described the recent decisions as a means to regulate the relationship between bakery owners, mills and citizens, with the goal of improving service quality. “If there’s a weight deficiency, or if I find a bakery hoarding cards or using a dispensing device that isn’t theirs, or purchasing bread points from individuals or operating in a commercial capacity, I have the right to impose a penalty.”