The production capacity of domestic sweets and chocolate factories declined to 800,000 tons in the last Iranian year that ended on March 20 from 2.6 million tons in the previous year, says the secretary of the Sweets and Chocolate Producers Association, adding that 70% of the industry’s production capacity remain inactive.
“Production of sweets and chocolate stood at 1.7 million tons in the fiscal 2021-22, but due to problems such as foreign currency fluctuations, difficulty in supplying raw materials and lack of working capital, the output declined to 800,000 tons last year,” Jamshid Maghazei was also quoted as saying by IRIB News.
“A total of 960 factories were operating in this industry in the past, but under the circumstances, some small production units have become inactive or converted their business.”
According to the official, the average annual export of domestic industrial sweets and chocolates earned up to $1 billion in the past years and if the production capacity of this industry is fully used, it is possible to export up to $2 billion worth of products.
“In the fiscal 2021-22, one-sixth of the production volume or about 300,000 tons were exported to 66 countries, including European countries, the US, Persian Gulf countries, and those in East Asia.”
Referring to the negative impact of currency fluctuations and the removal of cheap foreign currency allocation by the government, he said raw materials in this industry are affected by USD fluctuations, and the changes in the currency market make it more difficult to provide resources and raw materials in this industry.
“The removal of the preferential foreign currency also caused us to face a fourfold increase in the price of raw materials in this industry. For example, the price of sugar, which was 45,000 rials before these conditions, reached 200,000 rials and the price of edible oil has increased sixfold,” he said.
“The increase in the price of raw materials and the consequent increase in the price of products has affected the sweets and chocolate market that has become smaller by 40%. Currently, manufacturers only produce as per orders, and most of their production capacity is inactive.”
The rise in prices of goods and services accelerated at an unprecedented pace after the government decided to overhaul the import subsidy system.
The government move saw the abolition of the controversial practice of allocating cheap dollars at the rate of 42,000 rials per dollar, locally known as the Preferential Foreign Currency, to import essential goods, including corn, soymeal, unprocessed oil, oilseeds and barley, in addition to wheat, flour and medicine.
The market value of the dollar is currently above 500,000 rials.
“Until now, we have been paying to producers [read importers] but now the subsidies go to consumers. In fact, the Preferential Foreign Currency has not been ceased, rather the allocation method has changed,” President Ebrahim Raisi said in a televised speech on the eve of the introduction of the move in May.
In his speech, Raisi emphasized that the removal of cheap dollar allocation will not lead to a price rise in wheat, flour and medicine. However, the move has led to a dramatic rise in the prices of essential goods. In fact, the prices of all commodities and services have also risen suddenly in a ripple effect.
Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.
