Command control over inflation turned out to be drug-infectious: having started by freezing prices for sugar and sunflower oil, government officials seem to be unable to stop.
According to Vedomosti and Kommersant, the Russian government is thinking about expanding the list of goods subject to strict state price regulation.
Deputy Minister of Agriculture Oksana Lut raised the issue of rising prices for basic products at a meeting with sectoral unions and regional agrarian departments. According to Vedomosti, it was omakarons and eggs, according to Kommersant, it was about pasta and grain.
Lute asked regional representatives to get manufacturers to stop raising prices in the first quarter. If growth continues, the Ministry of Agriculture will be forced to take the same measures as was the case with sugar and grain – to set maximum retail prices.
In the Ministry of Agriculture, RIA Novosti confirmed that they recommend the regions to hold negotiations with producers to contain prices for pasta and eggs. The list also includes potatoes, which have risen in price by 33.8 %% over the past year and another 4.9% since the beginning of this year.
Egg prices, according to Rosstat, have been growing for 17 consecutive weeks. Over the past year, they added 15.1%. Pasta rose 12.1% in price and added another 0.5% in 2021.
Overall food inflation in 2020 hit a record since 2017 and continues to accelerate amid skyrocketing vegetable prices.
In mid-December, we recall that the authorities introduced maximum wholesale and retail prices for sugar and sunflower oil: 36 and 46 rubles per kg and 95 and 110 rubles per liter, respectively.
As a result, small and medium-sized retail chains faced difficulties in purchasing milk and butter at regulated prices – on the terms of the government, suppliers are ready to ship only small volumes and ask for a premium for their delivery.
Strict price regulation may ultimately lead to the fact that “the entire agricultural industry will be in ruins – this is after the whole country was thrown off in 2014 under the slogan of import substitution to raise our producers,” says NES rector Ruben Yenikolopov.
“A strict price restriction will lead to a shortage of the product – no one will sell goods at non-market prices. If prices are limited more gently – due to export duties – the manufacturer will not leave the market, but the profitability of the business will begin to disappear, and less and less investments will start coming to the industry. By the way, this is another indicator that it is impossible to make long-term investments in Russia – because as soon as you start making a profit, the state comes and takes it, ”he says.
By setting maximum prices for socially important products, the state is trying to fight the impoverishment of the population, says Natalia Orlova, chief economist at Alfa-Bank: low incomes, and we have to use price controls to prevent a sharp drop in the living standards of these households ”