Kahlon Loses Dairy War: Prices to Rise 3.4 Percent

YERUSHALAYIM -
Kulanu Party leader and Finance Minister Moshe Kahlon. (Hadas Parush/Flash90)

In a blow to Finance Minister Moshe Kahlon, the High Court ruled Monday that dairy concerns could raise the price of basic products by an average of 3.4 percent. The court accepted the petition by Tnuva against the Finance Ministry, and ordered Kahlon to sign the permit that will allow the prices to increase. Kahlon said that he would “study the decision and act accordingly.”

Kahlon has been trying to stave off the price increase, which was authorized last year by the Finance Ministry’s Agriculture Committee, which is in charge of setting government-controlled prices on basic dairy products, like milk, cottage cheese, white cheese for spreading (5  percent and 9 percent), etc. The committee, taking into account the cost of raw materials, gave permission to the dairies to raise prices by 5.8 percent. Further increasing costs has boosted that increase to 6.6 percent.

Kahlon has been negotiating with the dairies to prevent such a drastic increase, especially on the eve of an election in which his Kulanu party is already struggling. The Finance Minister was able to get Tnuva to agree to lower its price increase, and the dairy concern said it would raise prices by 3.4 percent. Kahlon felt that was still too much, and tried to persuade Tnuva to agree to a 1.5 percent price increase, to take place only after Pesach. In response, Tnuva filed the petition, demanding the price increase.

Tnuva claims that it has lost NIS 200 million over the past two years due to the increased costs of raw materials. In the deal Kahlon has been promoting, the government will give up certain payments that the dairies would owe the government in 2019 and 2020, in lieu of the full price increase. Tnuva has reportedly accepted the deal.

However, in response to a petition by Tnuva last year seeking to prevent government efforts to stop the price increases, the government argued that, given the breakup of the Knesset, legislation on reducing the cost of raw milk that had been pending is now dead, and the government could not oppose the price increases. The court said in its decision that given the situation, there was no legal basis to prevent the price increases.

When Kahlon signs the order, the price of a liter of 3-percent milk in a plastic bag will increase from NIS 5 to NIS 5.17, while the price of a liter in a carton will rise from NIS 5.74 to NIS 5.95. Sour cream will go up 8 agurot, butter 14 agurot, and a kilo of yellow cheese by NIS 1.4.