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Wednesday, 20 June 2018

Car assemblers, bakers and transport providers grapple with fuel price hike

Automotive assemblers, bakers and transport providers continue to grappling with the impact of this past weekend’s fuel price hike, the latest in the Sisi administration’s bid to phase our ruinous energy subsidies that disproportionately benefit the wealthy.

Subsidized bread production will cost state coffers an additional EGP 5 bn after the latest increase in fuel price hikes, unnamed Supply Ministry sources tell Al Mal. The state will now pay EGP 60 bn for a year of subsidized bread production. Prior to Saturday’s increase in fuel prices, each loaf of subsidized bread cost EGP 0.60 to produce. The government covered EGP 0.55 and subsidy recipients provided the remaining EGP 0.05, the retail price of each loaf. Each loaf now costs EGP 0.65 to produce. Supply Minister Ali El Moselhy had said over the weekend that the ministry would maintain the retail price of subsidized bread and reimburse bakers for additional costs incurred.

The ministry also agreed to lower prices on subsidized flour to bakers, raising their profit margins to EGP 200 per sack of flour (one sack is enough to produce about 1,250 loaves), up from EGP 180 previously. However, the increase is not enough for bakers to cover all additional production costs, including electricity, water, wages, and yeast, member of the Federation of Egyptian Chambers of Commerce’s bakeries division Abdel Rahman Omar tells the newspaper. Bakers believe a fair profit margin is EGP 240 per sack of flour, he added.

Auto assemblers expect prices on locally-assembled cars to rise following subsidy cuts: The Egyptian Automotive Manufacturing Association (EAMA) expects locally assembled cars to see a 10-15% jump in retail prices on the back of higher electricity and fuel costs, EAMA head Hassan Soliman tells Al Mal. Imported vehicles, meanwhile, should see their prices rise between EGP 2,000 and 3,000. Soliman doesn’t see the price hikes sapping momentum in the industry, where sales are recovering from last year’s nadir.

Meanwhile, the ride-hailing app service for white taxis, Egy Taxi, said yesterday that it would suspend its services indefinitely due to an inability to cope with rising costs, the newspaper also says. This came as the Public Transport Authority yesterday decided to double bus ticket prices in Cairo to EGP 3. “People returning to work in Cairo on Tuesday seethed at the new sums they had to pay to board buses or fill up their vehicles with petrol,” notes Reuters.

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