It has also delayed their implementation from March to October 2011.
Environment minister Jane Davidson said the reduced charge would suit all parties. "After listening to feedback we are proposing a 5p minimum charge, which I am satisfied will bring about the desired behaviour change without presenting an unnecessary financial burden on the shopper, or preventing impulse shopping," she said.
There had been concerns from the British Retail Consortium that the 7p charge would have made the bags as expensive as bags for life. Head of environment Bob Gordon welcomed the reduced charge, but said that Welsh retailers had already made significant reductions in the number of single-use plastic bags handed out without having to resort to legislation.
A final decision will be made by the Welsh Assembly Government on November 30 and, if made law, the charge for single-use bags will come into effect on October 1, 2011.