Russia has come up with a new way to deal with rising prices
10 March 2021
The Russian government is introducing a new method of price control. Now, each department must constantly monitor and quickly detect a sharp rise in prices for certain goods. How will this price control system work, how does it differ from the existing one, and most importantly - will it help to keep the price rise? Experts fear that excesses here are fraught with deficits.
Russia introduces constant monitoring of prices for consumer goods and services. Moreover, the responsibility for tracking specific goods is assigned to certain departments.
Thus, the Ministry of Agriculture will track the prices of food and tobacco products. Rosalkogolregulirovanie has been appointed responsible for alcohol prices. Non-food products are assigned to the Ministry of Industry and Trade: clothing, furniture, household appliances, etc. The Ministry of Health is assigned to medical products and medicines. The Ministry of Energy will be responsible for the prices for gasoline (grades AI-92 and AI-95) and diesel fuel (winter and summer).
The ministry of digital will monitor the tariffs for communication services, the ministry of construction - for the tariffs for housing and communal services. The Ministry of Transport has been appointed responsible for passenger transportation (except for taxis). Rostourism will be responsible for hotel prices, etc.
If prices start to rise sharply, departments will have to offer the government economic measures to combat this.
This is not to say that no one in Russia monitored prices. “Price monitoring has always existed in the country. Rosstat has traditionally dealt with it. In recent years, the FAS has actively joined the "topic". Both services have in common a ramified structure of territorial bodies. The former give the government the dynamics of prices, and not only retail ones, with a lag of a month or more and have proven technologies. The latter are rather engaged in selective observation in the course of proceedings and the search for "victims" among market participants. They are not able to track the array of prices online, and they were created for other purposes, ”says Professor of the Department of Trade Policy of the PRUE. Plekhanov Vyacheslav Cheglov.
However, in what mode the prices will now be monitored is not specified. “We used to monitor prices from the reporting period to the reporting period. And the current situation requires more rapid tracking of price changes. I think that now they will be monitored on a daily basis in order to have time to react promptly, ”says Alexey Korenev, an analyst at the Finam Group of Companies.
Why are the authorities so worried about prices right now, because formally inflation in the country is far from double-digit values? The problem is that unexpected surges in food began last year, and the situation is not improving.
“When at first only vegetable oil and sugar rose in price, we decided that we had a poor sugar harvest. We usually produce 6.4 million tons of sugar, and last year, due to a poor harvest and a decrease in areas, we produced only 5 million tons of sugar. Although there were carryover stocks of 1.3 million tons, that is, we covered our needs. But when the prices of other foodstuffs began to rise, the government caught on. It became clear that this is not a one-time phenomenon, but already a system, ”says Korenev.
For example, grain, flour and bakery products have become more expensive. Although a unique grain harvest was collected - the second record harvest in the entire history of Russia (the first was in 2017). By the end of winter, vegetables began to rise in price, because they ran out of their vegetables of the previous season and had to carry imported ones, the expert notes.
Food inflation in Russia in the first two months of the year has already shown significant growth.
“If in January the rise in prices amounted to 1.02%, then in February it was already 1.22%. In annual terms, these will be exactly double-digit indicators. And as a result - social tension".
- notes the head of the analytical department of AMarkets Artem Deev.
How effective the new mechanism for combating price increases will be depends largely not so much on monitoring (this is just not difficult to do), but on what measures will be taken when price surges are promptly detected. But this is just not clear to the end.
Apparently, the departments will report information to the Ministry of Economic Development, the ministry - to the government, and the same FAS, which has legal instruments, will act as the "investigator" and "punisher", explains Cheglov. Then efficiency, in his opinion, will be small due to the loss of a heap of time, which is not. At first, time will be spent on preparing and perfecting the observing mechanism. And then time will flow away into processing information, discussing it and making decisions. “As a result, price monitoring will allow making decisions after the fact, but proactive actions are needed,” Cheglov said.
On the other hand, he adds, by this very order the authorities sent a message to the business: “We see everything. Do not raise prices sharply, that is, above inflation. The government is ready to act".
There is, of course, no one-size-fits-all recipe for dealing with rising prices. But experts believe that these will be administrative measures: from manual freezing of prices to the introduction of export duties, quotas, etc.
“As I understand it, the government will choose its measures of influence on a case-by-case basis.
I would like these solutions to be more marketable and not destroy the business. Because the mechanical freezing of prices will lead to a shortage of goods.
When restrictions on sugar prices were introduced, in some regions, albeit for a short time, there was still a shortage of sugar. Secondly, it can ruin the business. For example, when duties were increased on grain of the fourth category, it became equal in price to grain of the third category, and it became unprofitable to sell it. A significant part of the business is already operating on the brink of profitability. If the price turns out to be lower than the cost of production, then it will be more profitable to close production than to produce at a loss. And these are jobs, ”says Aleksey Korenev.
This can be avoided by taking stimulating measures for business at the same time as freezing prices, the expert said. We are talking about reimbursing at least part of the increased costs of manufacturers in the form of preferences, subsidies, preferential loans, etc.
Korenev believes that the jumps in food prices are nevertheless caused not by the desire of business to grab an extra piece of the pie, but by objective inflation of costs. “Costs are growing along the entire chain from the field to the counter, both for farmers, and for the food industry, and for logistics, and for retail. The costs increased for all, mainly due to the depreciation of the ruble last year by 20%. And the equipment is mostly imported. In the food industry - 70% of imported equipment, in the meat industry - almost 100%, and in the oil and gas production - 100% of imported equipment. Medicines are produced in Russia, but imported substances are used for them. Therefore, when freezing prices, it is necessary to help reduce costs for producers, ”Korenev said.
From abroad, farmers bring not only equipment, but also components without which agriculture is impossible. “In the agro-industrial complex, we use imported seeds (40% of the total seed fund), in livestock breeding we use breeding stock from abroad, in poultry farming - hatching eggs. Imported preservatives and packaging, veterinary drugs, premixes (feed additives), equipment and spare parts, pesticides and growth stimulants, etc. ", - points out Artem Deev.
The rise in prices for wheat, which is used as feed for animals and poultry, leads to an increase in the costs of meat producers. And the rise in the cost of mineral fertilizers due to the increase in the mineral extraction tax affects the costs of growing vegetables. The devaluation of the ruble as a reason for the growth in costs of Russian producers is added to the global rise in prices for food and goods.
Text: Olga Samofalova