The Government is asking retailers across the Emirates to lower the prices of popular products in the run-up to Ramadan.
Coming just weeks after it launched a campaign to set the prices of 400 basic foods for six months, the request is likely to further dent the profits of retailers battling inflation.
Shawqi Khalil Hassan, the food purchasing manager for Union Co-operative, met representatives of the Ministry of the Economy and a number of retailers yesterday to discuss price reductions for foods, which he said would be offered at cost price or lower.
"Starting now, we are controlling the prices, and margins will, of course, be taken from our profits," Mr Hassan said.
Retailers are coming under increasing pressure as they seek to balance rising input costs and inflationary pressures with governmental moves to keep a lid on prices.
Sultan al Mansouri, the Minister of Economy and the Chairman of the Supreme Committee for Consumer Protection, also instructed retailers yesterday to stop charging additional fees for credit card usage. That directive will be effective from July 1.
For those retailers that add surcharges, the move will effectively cut margins by whatever credit card providers charge them for transactions.
Mr Hassan said he hoped increased demand for food in the run-up to Ramadan would mean higher volumes, which would help limit the effect on profits.
He is also negotiating with suppliers to bring down the costs of other products.
"We already decided that this would be our plan and community items would be controlled," he said.
"We are looking at deals with our main suppliers so it can be managed."
Prices of popular goods such as sweets and soft drinks would also be reduced in Union Co-operative outlets, Mr Hassan said.
The Government is also asking retailers to reduce the prices of basic foods - such as bread, fruit, vegetables, frozen goods, meat, rice and pasta - that they have not already reduced under the six-month price scheme.
NS Jayan, the purchasing manager for the Abu Dhabi Co-operative Society, said the store would reduce prices on almost 100 products from next month onwards, on top of the 40 reductions it made for last month's price campaign.
"We are supporting customers during Ramadan and sacrificing our margins," Mr Jayan said.
The retailers decide what products they are going to reduce prices on and have to submit a list of them to the Ministry of the Economy by June 20.
Lulu and Carrefour have also signed up to the new scheme, sources say.
For the past three years, Lulu has offered a basket of essential Ramadan goods at 15 to 20 per cent lower than the retail price and, in partnership with the Mohammed Bin Rashid Al Maktoum Humanitarian & Charity Establishment, the retailer offered money-off coupons to Emiratis.
This year's Ramadan campaign is voluntary, but any retailer not complying risks losing business to those that do.
Last year, the Ministry of Economy sent out inspectors to compare food prices during Ramadan with the previous month's prices to ensure that retailers were not cashing-in on the higher demand.
In 2009, the cost of some items rose by more than 17 per cent around Ramadan.