'It just defies logic'

Report: Food mail program a dog's breakfast

By JIM BELL

In a scathing report issued last week, a northern-based consultant is urging Ottawa to take its ailing food mail program away from Canada Post and use direct talks with retailers to create a new northern food subsidy plan.

Graeme Dargo, a ­Yellowknife consultant, said in his 45-page report that the decades-old food mail scheme needs "a complete overhaul that is focused, smart and results-oriented."

Indian and Northern Affairs Canada pays Canada Post to administer the program, which began in the 1960s.

Canada Post then contracts airlines to fly shipments of what is supposed to be perishable, nutritious food to retailers like the Northwest Co. and Arctic Co-operatives Ltd., who pay low, heavily-subsidized air cargo rates.

INAC budgets about $27.6 million a year for the program. But its actual cost is spiralling out of control, with spending of about $60 million predicted for 2008-09.

The lion's share of food mail spending is gobbled up in the eastern Arctic.

INAC reports that retailers and personal customers in Nunavut use about 56 per cent of total subsidy dollars spent, while Nunavik uses about 34 per cent. The remaining 10 per cent goes to communities in other provinces and the Northwest Territories.

Chuck Strahl, the northern affairs minister, hired Dargo in August 2008 to act as his special representative on the food mail program. His report was released last week, along with a separate report prepared by INAC officials.

After lifting the lid on the little-known scheme, Dargo found the federal government is likely squandering public money on a pot-luck stew of contradictions and questionable practices.

"I mean, this is public money and it just defies logic the way it's done right now. It just blew me away when I saw that. I was looking at INAC officials and going, how could you do this? How could you let this go on?" Dargo told Nunatsiaq News in an interview.

He found, for example, that Ottawa has no tools for ensuring retailers pass the food mail subsidy on to their customers in the form of lower food prices.

"I find it unacceptable that the department invests $60 million in a program and simply assumes that the subsidy is being passed on," Dargo wrote in his report.

However, he also said northern food shoppers do appear to benefit.

He found, for example, that a 10-pound bag of potatoes sent to Pond Inlet using food mail cost $18.29 at a local store. Without the food mail subsidy, that same bag of potatoes would cost a staggering $64.49.

But numerous northern residents still believe food retailers are simply pocketing the subsidy and not passing it on to customers.

"It does not matter what I say or how many studies indicate that the subsidy is passed on, as long as residents are unable to see how subsidies are applied at point of purchase they will continue to perceive that retailers do not pass on the food mail subsidy," Dargo wrote.

To fix that, Dargo recommends the federal government change the program so customers see the subsidy being applied at retail checkout counters.

And the best way to create such a revamped program is for INAC to work out a new air freight subsidy system with retailers.

"What I believe is that retailers know how to ship. They've been doing it a lot longer than Canada Post. It's in their interest to get fresh goods to their outlets in the most efficient and effective way possible," Dargo said.

Northern retailers complain the food mail system actually interferes with their own distribution networks and that Canada Post will not compensate them for goods that are spoiled or damaged, Dargo found

"They all said the same thing to me. They're sick and tired of Canada Post."

He also found a big inequity in rates charged for non-perishable and non-food items between Nunavut and Nunavik.

In Nunavik, retailers pay only $1 a kilo for non-perishable items, but in Nunavut the rate for such goods is $2.25 a kilo.

The result is that retailers in Nunavik now use food mail subsidies to reduce the cost of many products that ought to come up on the sealift.

That includes non-food items like jeans, men's socks and designer sleepwear for babies.

"When you take a look at some of the items that are eligible, it just doesn't make sense. My jaw dropped when I found that out," Dargo said.

He also said the program subsidizes potentially unhealthy products like frozen pizzas and ready-to-eat frozen dinners.

But at the same time, it does not cover the shipment of highly nutritious country food, Dargo said.

Yet another problem is the practice of allowing individuals to make personal food mail orders, which usually benefits affluent people only.

"You've got to have a credit card, you've got to be able to communicate in English or French, and you need a vehicle to pick up your stuff when it arrives. This is at odds with the minister's mandate and doesn't contribute one dime to the northern economy," Dargo said.

Such personal orders have ballooned to between 200 to 300 a week in Iqaluit alone and suck more than $5 million a year out of the program, Dargo said in his report.

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