The government limits traders' margins to five to 15 percent

Nik Đeljošaj's Ministry of Economic Development has prepared lists of entire groups of food products for which wholesalers and retailers will have to reduce their share of earnings. The government should decide on this proposal by the end of the week

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The goal is to protect the purchasing power of citizens: Nik Đeljošaj, Photo: Djordje Cmiljanic
The goal is to protect the purchasing power of citizens: Nik Đeljošaj, Photo: Djordje Cmiljanic
Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

Trade margins in wholesale and retail will be limited to five to 15 percent for some basic foodstuffs, food products and hygiene products.

This is foreseen by the amendments to the decision on temporary measures to limit the prices of products of special importance for human life and health and to the list of products. This document was prepared by the Ministry of Economic Development (MER), headed by the Minister Nick Djelosaj. "Vijesti" has an insight into the proposal of the Decision, which should be at the Government session this week.

In the explanation, it is stated that it is a comprehensive action because it does not refer only to one article from a certain product group, but to all articles from a given product category. For example, the margin limit for "chicken meat" applies to whole chickens, drumsticks, white chicken meat, wings..., so it includes hundreds of product categories in every major retail chain.

The lists of products for which margins are limited are divided into three groups. For the first group of products, the margins are limited by the Government's decision from June 2022, and now it is proposed to extend them so that the margins in wholesale will continue to be limited to five percent and in retail to seven percent for wheat flour type 400 and 500, crystal sugar , edible sunflower oil and table salt. The margin is limited only to salt in a one-kilogram package, while for other products in the group, the margin limit applies to all weight packages.

In the second group, where the limitation of margins in wholesale and retail trade is now proposed to be 10% each, there are 31 categories of food products, such as homemade cheese, bottled (still and carbonated) water, yogurt, chicken eggs 10 pieces, potatoes, milk, chicken meat, pork meat with and without bones, rice, frozen fruits and vegetables... Only for eggs, the margin is limited to 10 pieces, and for other categories there is no limit, but the margin reduction is mandatory regardless of weight, quantity, manufacturers or subgroups of those categories.

In the third group there are products for maintaining hygiene, and this proposal limits the margins for wholesale to 10% and for retail to 15%. This group includes children's soap, children's diapers, shampoo and bath for babies, shampoo and bath for adults, toothpaste, toilet paper, liquid and powder detergents and sanitary napkins.

Margin is part of the price of each product, which the trader covers his costs and enables himself to earn.

Why is the restriction necessary?

In the explanation of the decision, it was stated that in accordance with the Law on Temporary Measures for Limiting the Prices of Products of Special Importance for People's Life and Health, which was adopted by the Parliament in May 2022, the Government established in June the Decision on Temporary Limitation of Margins in Wholesale Stores on five percent, and in small shops seven percent for wheat bran (type 400 and 500), sugar, sunflower oil and table salt.

The goal of this decision was to limit the rise in the prices of basic foodstuffs and influence the reduction of the inflation rate.

Data on the annual rate of inflation in the period from June 2022 to November 2023, as stated in the explanation, indicate the justification of the introduction and extension of measures in order to "establish price stability and protect the living standards of citizens to the extent possible." According to Monstat data, the annual inflation rate in June 2022 was 13,5 percent, and continued to grow until November of the same year, when it reached a maximum of 17,5 percent. Then the inflation rate started to decrease, reaching 4,8 percent in November last year.

"Although inflation is mainly caused by external shocks and is the result of the action of numerous factors, such as problems of insufficient supply at the global level and the energy crisis, it is very important for the extremely open Montenegrin economy to adequately monitor the current situation and adopt timely measures in order to adapting to new circumstances. The Ministry believes that the key factors that determine the general increase in price levels globally, such as the war in Ukraine, supply chain disruptions, the consequences of the COVID-19 pandemic, growing uncertainty, but also the newly emerging situation in Israel, continue to operate and in combination with other factors affect to the creation of inflationary expectations and create a certain inflationary pressure", the explanation of the decision states.

It was assessed that the factors that worked in June 2022, when the Government first made the decision, are still working, and therefore it is necessary to continue its application and pay special attention in order to bring inflation under control and protect the purchasing power of citizens .

The data show that price growth is observed

"Based on the available data of the Directorate for Inspection Affairs and regular reports and analyzes of MER, it can be seen that there is an increase in the prices of products that make up basic food products, however, it is evident that for the majority of products where the restriction of trade margins is in force, there has been a decrease in retail prices . MER's analysis shows that in the period from June 2022 to November 2023, the price of edible sunflower oil per liter decreased by an average of 48 percent, the price of wheat flour per kilogram decreased by an average of 17 percent, the price of sugar per kilogram decreased by an average of two percent, while there was an increase in the price of table salt per kilogram by an average of 14 percent, and due to the increase in the purchase price of this product by more than 35 percent," the explanation stated.

Illustration
Illustrationphoto: Boris Pejović

It is also noted that the decision had a favorable effect on the price reduction of basic foodstuffs and that it significantly protected the living standards of citizens and that it especially contributed to the protection of the standards of the most economically vulnerable categories in whose consumption structure basic food products occupy the largest relative share.

The previous government organized the "Stop Inflation" campaign twice last year - from the beginning of March to the end of June, and from the beginning of October to the end of November. The campaign was organized together with traders who reduced the prices of about a hundred products by ten to 40 percent.

Yesterday, several retail chains did not answer the "News" about their margins on food products and hygiene and cleaning products.

The business of retail chains is not threatened

The explanation of the decision also includes data from Monstat, on the growth of turnover in the retail trade of food products in 2023 compared to 2022, as well as the growth of profits, as proof that limiting margins would not threaten the business of retailers.

"The profit of large retail chains in 2022 amounted to 19,43 million euros, which is 47,42 percent more compared to the pre-crisis year of 2019, when it amounted to 13,18 million euros. In 2022, compared to 2021, wholesale grew by about 22 percent, and in 2021, compared to 2020, by about 23 percent. In this way, the operations of business entities would not be jeopardized, and a significant effect would be achieved in protecting the standard of living of citizens," the explanation of the decision states.

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