Government looking into causes of inflation
At a government presidium meeting on March 5, Prime Minister Vladimir Putin asked the Federal Anti-Monopoly Service to look into a paradoxical situation that had evolved in the agricultural sector: wholesale prices of oils and lubricants are rising despite the stabilisation of oil prices at $40-$45 per barrel.
TO FARMERS "WITH LOVE"
Note that, according to the Federal State Statistics Service (Rosstat), the wholesale prices of oils and lubricants are in general falling. It seems the prices of petrol and diesel oil are rising only in rural areas. Vladimir Putin called this "an anticipation of the spring sowing season:" fuel producers realise that agrobusinesses are willing to pay any price for oils and lubricants, to avoid disrupting spring planting.
Actually, the prime minister accuses oil companies of collusion. The government has a list of companies violating competition law, but First Deputy Prime Minister Viktor Zubkov, who appeared in front of journalists after the meeting, refused to claim this publicly, saying only that the prime minister's criticism was mostly directed at state-run companies.
According to Viktor Zubkov, from January 15 to February 12, the wholesale prices of petrol for agrobusiness rose by 17.6% and of diesel fuel by 20.2%. As of February 12, the average price of petrol AI-76 and AI-78 (80) for agrobusiness was 16,460 roubles per metric ton, and of diesel fuel 19,170 roubles per metric ton. Both Zubkov and Putin have called on the oil companies to lower prices to those at the start of the year, "or even below it," Putin added.
Fuel costs account for 30%-40% of agrobusiness' expense. In 2009, they will need 5.45 million metric tons of diesel fuel and 2.02 million tons of petrol. In February 12 prices, agrobusiness will spend 137.8 billion roubles to buy fuel. By reducing these expenses or, at least, preventing their increase, the government will reduce production costs of farm products. Also, it will be able to save budget funds, because federal authorities usually compensate agrobusinesses for fuel price increases.
The government will first talk with oil companies on a case-by-case basis, and if this does not help, the Federal Anti-Monopoly Service will step in.
Such practices were used in previous years, when the government reached agreement with oil companies that they would not raise wholesale fuel prices before the spring sowing campaign. Surgutneftegaz is ready to supply 120 metric tons of petrol to agrobusinesses at 14,040 roubles per ton, and 200 metric tons of "summer" diesel fuel at 14,160 roubles per ton.
Food prices not to rise more
The next meeting of the government commission for sustainable development of the Russian economy chaired by Deputy Prime Minister Igor Shuvalov will look into the causes of food price increases. The government wants to examine the chain of commodity-production relations and their impact on the end cost of the product. "Then we will see why the prices are rising," Zubkov said. He also said that in one region flour cost 9,000 roubles [per metric ton], and in another 13,000 roubles. As a result, the price of a kilo of bread varies from 25 to 45 roubles. "This is despite the fact that the current grain price is normal, and there are 7.5 million metric tons of grain reserves in the grain intervention fund," the first deputy prime minister said indignantly.
The law on trade will help to partially regulate the price formation process. However, it has not been drafted yet. The ministry of industry and trade is planning to draft it by autumn. Zubkov is no longer talking about maximum distribution margins for socially important goods. "There are fears that such goods will disappear from retail outlets," the first deputy prime minister admits. In other words, the government understands that the producers may refuse to produce, and retail chains to sell such goods, and that no administrative measures can make them do so.
The fight against price increases might be called a social anti-crisis measure. The meeting of the government presidium held on March 5 discussed, among other things, the Cabinet's successes in its efforts to stabilise the economy. Economic Development Minister Elvira Nabiullina delivered a report on this issue (the second one since the start of the year). She dwelt on the implementation of the plan of action to improve the situation in the financial sector and some other economic sectors, as endorsed by Vladimir Putin on November 6, 2008. According to the economic development ministry, law makers managed to keep up the pace in enacting anti-crisis legislation. However, Putin recommended that they work more rhythmically. "All the ministries and departments must step up their work and learn to make the necessary decisions in a timely manner," the prime minister said.
Maxim Tovkailo