Cheez Whiz, ice cream and toilet paper in remote northern grocery stores will again be covered by a federal subsidy program after a public outcry over skyrocketing prices.

Indian and Northern Affairs Minister John Duncan announced the change Wednesday in Iqaluit.

Historically, the federal government has provided grocery transportation subsidies to lower the food prices in northern communities that don't have regular road or marine access.

Indian and Northern Affairs Minister John Duncan announces changes to the Nutrition North food subsidy program in Iqaluit on Wednesday. (CBC)

Under the new Nutrition North program, which takes effect April 1, the subsidies will go to retailers, who will negotiate freight rates for lower costs that the federal government says must be passed on to consumers.

But when the transition to the new program began last October, federal officials phased out subsidies for non-food items and food not deemed to be healthy, including processed cheese spread, ice cream, bacon, margarine, toilet paper, laundry detergent and toothpaste.

Prices for these items later became exorbitant and attracted national attention. Last month at the Northern Store in Arctic Bay, a community of 700 in Nunavut's High Arctic region, Cheez Whiz sold for $29, tubs of margarine for $27 and bags of breaded chicken for $77.

Subsidy stays until October 2012

With the change announced Wednesday, Cheez Whiz and the other items will be subsidized by Nutrition North from April 1, 2010, until October 2012. Many of those items will receive a lower subsidy, however, compared with fruits, vegetables and other nutritious items.

Duncan conceded the previous timeline for Nutrition North was a "little bit aggressive," adding the federal government is committed to ensuring northerners have access to nutritious, affordable foods.

With the subsidy extension to 2012, retailers will also have more time to adjust to the new program, Duncan said.

The costs could amount to another $1 million a month, Duncan said. The Nutrition North program was originally expected to cost $60 million for the year.

Cheez Whiz was selling for $29.39 at the Northern Store in Arctic Bay, Nunavut, last month, after the federal government began phasing out subsidies for hundreds of grocery products. (Submitted by Ron Elliott)

"Today's announcement is another example that our government is listening to northerners," Health Minister Leona Aglukkaq, the Conservative MP for Nunavut, said at the news conference.

In February, after photos of the expensive Arctic Bay groceries were published, Aglukkaq said decisions by retailers, not changes in the federal subsidy, were responsible for high prices in the North.