Romania extends the cap on trade surplus for basic food products
The trade surplus on basic foodstuffs will be capped for another 60 days, Prime Minister Marcel Ciolacu announced on Monday 29 January 2024. The measure capping the trade surplus on some food products at a maximum of 5% was to expire on 1 February.
This price cap measure for a limited category of food products was put in place first time in 01 August 2023 by the Romanian Government for moderated speculative price increases. It helped to lower inflation and maintain the purchasing power of the population.
The representative of the Minister of Agriculture stressed in the summer of 2023 that the measure would not be a limitation on prices charged by farmers nor an intervention on market prices.
According to official sources, the ordinance to extend for another 60 days the mechanism to limit the trade surcharge on basic foodstuffs is expected to be adopted by the government on Wednesday 31 January 2024.
The capping of trade surcharges is imposed on the following products:
bread / fresh cow's milk / bulk cow's milk cheese / plain cow's milk yoghurt / white wheat flour / butter / corn flour /magiun/ eggs / sunflower oil / fresh chicken meat / fresh pork meat / bulk fresh vegetables / bulk fresh fruit / bulk white potatoes / bulk white sugar / rice - round grain / sour cream 12% fat / pears / garlic.
The main players that could be affected by this measure are processors, traders and retailers, who are obliged to respect the percentage limits of the commercial additions for these basic food products.
The commercial additive quotas for these food groups have been limited from 1 August for a period of three months by an emergency ordinance, with the stated aim of curbing the rise in basic food prices.
For these products the price ceiling (price cap) is as follows:
- the trade margin applied by the processor may not exceed 20% of the production cost of the product, calculated in accordance with the accounting rules in force, including direct and indirect costs;
- the trade margin applied cumulatively throughout the distribution chain, independently of the number of distributors in the chain, may not exceed 5% of the purchase price plus operating costs;
- the part of the trade margin applied by the trader for retail sales and cash & carry sales may not exceed 20% of the purchase price plus the trader's direct and indirect costs; the part of the trade margin of maximum 20% also includes the discounts and rebates referred to in Article 3(6) of Act No 81/2022 on unfair business-to-business commercial practices in the agricultural and food supply chain.
The measure applies to the value excluding VAT of the agricultural and food products concerned, according to the Government Emergency Ordinance (GEO) adopted by the Government on 30 June.
According to last press release, Prime Minister assured a few day ago, that according to data from the National Institute of Statistics, prices in December 2023 were 5.8% higher than in December 2022, while in June 2023 (before the introduction of this measure) the difference compared to the same month of the previous year was almost 18%. At the same time retailers do not agree with capping trade surcharges in their current form and have proposed a mechanism to allow fixed point intervention.
The Prime Minister expressed his desire to continue the dialogue with the large retail chains, in order to build together a long-term mechanism based on a state-business partnership, whereby prices are kept under control.
Failure to comply with the provisions constitutes a contravention, unless it has been committed in such conditions that, according to the criminal law, it constitutes an offence, and is punishable by a fine of 100,000 lei to 2,000,000 lei, the act states.