Israeli Finance Chief Avoids Making Unpopular Decision to Raise Dairy Prices

The dairy giant Tnuva claims that Kahlon is stone-walling price increases to regulated dairy products in order to avoid being portrayed as someone who agrees to price hikes

Finance Minister Moshe Kahlon attends a ceremony for the signing of a housing agreement in Sderot, Israel, April 9, 2018.
REUTERS/Amir Cohen/File Photo

Tnuva has complained in a petition to the High Court of Justice that Finance Minister Moshe Kahlon’s aversion to making unpopular decisions is holding up a price hike to regulated dairy products.

The dairy giant also cited disagreements between the finance and agriculture ministries “that have nothing to do with the dairy industry.”

Tnuva’s accusation against Kahlon regarded the mechanism for adjusting the price of milk, which is at the center of a dispute between the finance and agriculture ministries and Tnuva. The conflict arose in wake of the price gap between the controlled price of raw milk that Tnuva pays dairy farmers, which is regularly adjusted, and the price of dairy products, which Kahlon has refused to adjust for several months.

>> Read more: The Story of a Tomato, the Story of Israel’s High Prices | Opinion

Tnuva announced three weeks ago that in response to Kahlon’s stonewalling, it would raise the price of unregulated dairy products, and it was the first dairy to do so. Tnuva asserted that the company up to that point had absorbed an extra 160 million shekels ($44.4 million) due to the increased price of milk, a figure that would grow to 200 million shekels by the end of 2018. On the other side, the finance minister is laboring to prevent an increase in dairy prices, and is seeking especially to avoid being portrayed as someone who agreed to price hikes.

Tnuva petitioned the High Court in July to direct Kahlon to sign an order adjusting regulated dairy prices. Tnuva asserted that not signing the order violates rules regarding price controls.

Meanwhile, Kahlon has gotten mixed up in a confrontation with Agriculture Minister Uri Ariel, who is also a respondent in Tnuva’s suit. Ariel attacked his colleague in a letter to Kahlon, in which he noted that although he had signed the order to increase controlled dairy prices in line with the recommendation of their interministerial price committee, Kahlon “refused to sign, and the dairy industry was whiplashed.”

A company lawyer said in a follow-up brief to the court that the situation has become “intolerable.” The company is now asking the attorney general to intervene without getting the court involved.

In its request to the attorney general, Tnuva also complained that it is not a partner to the discussions being held for over a year with farmer representatives about reforming the dairy industry. Shai Babad, the treasury’s director general, is trying to reach agreement on reforms that would improve the efficiency of dairy farms and avert the need for increasing dairy product prices.

The High Court has given the state until September 13 to respond to Tnuva’s suit.