Ahead of Shavous: Kahlon to Sign Dairy Price Increase

In the wake of a ruling by the High Court, Finance Minister Moshe Kahlon will sign an order raising the price of basic dairy products by an average of 3.4%. Kahlon said in a statement that he was “forced to sign the order under protest.”

The price increase stems from a long-running dispute between Kahlon and the large dairies over the price increase. Last year, the Finance Ministry’s Agriculture Committee, which is in charge of setting government-controlled prices on basic dairy products like milk, cottage cheese and white spreading cheese (5% and 9%), gave permission to the dairies to raise prices by 5.8%. The increase was due to the increase in the cost of raw materials. Kahlon claimed that he had veto power over the matter and refused to sign the order.

Kahlon instead attempted to negotiate with the dairies to prevent such a drastic increase. He was able to get Tnuva to agree to lower its price increase, and the dairy concern said it would raise prices by 3.4%. Kahlon felt that was still too much, and tried to persuade Tnuva to agree to a 1.5% price increase, to take place only after last Pesach. In response, Tnuva filed a petition with the High Court, 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% 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.

In his announcement that he was now prepared to sign the order for the price increases, Kahlon said that “my stance has been and remains that there is no place to increase the price of dairy products, given the impact it will have on the cost of living and on the less wealthy segments of society. This was the reason I refused to sign the price increase order, but my stance was not accepted.”