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. Last Updated: 07/27/2016

Chernomyrdin to Control Prices

Prime Minister Viktor Chernomyrdin on Tuesday confirmed his intention to decelerate the reform drive launched in Russia last year, reimposing price controls on a number of key products.


Under a decree signed by Chernomyrdin, who took office less than a month ago, the prices of bread, milk, meat, sugar and other foodstuffs, as well as tea and vodka, will be prevented from rising.


The measure directly contradicts the policies pursued by Chernomyrdin's predecessor, Yegor Gaidar.


Itar-Tass described Chernomyrdin's move as an attempt to "curb inflationary processes and the unjustified growth in prices for certain staple food items, consumer goods and services".


According to a senior state pricing official, the decree does not actually set price levels, but rather limits the profits that may be earned by the firms concerned.


The official, Vladimir Safonov, deputy head of the State Price Committee, told Reuters that the decree was designed to restrict company profits to 10-25 percent of the value of their sales of bread, macaroni, salt, tea, sugar, milk, butter and meat, as well as baby food and some raw materials. Safonov said he hoped this would allow prices to stabilize at their current levels.


"It is a very mild and flexible interference into the serious situation in the. market", he said.


The move backward on prices was announced on a day when Chernomyrdin met with key Moscow industrialists to discuss Russia's economic future.


At the meeting, which was hosted by Mayor Yury Luzhkov, the new prime minister said that government support of "reasonable prices" for key goods and services was a necessary temporary measure. He indicated that the cost of transport services might also come back under control. Gaidar, who pioneered deep economic reform in Russia, freed most prices at the beginning of 1992. But while the drive toward a market economy has stalled, prices have continued to grow, with inflation topping 2, 000 percent for the year.


Gaidar was forced out of office in December by the conservative-dominated Congress of People's Deputies after saying that any limits on prices would lead to a wholesale resurrection of the Soviet command economy.


Chernomyrdin, however, insisted that he did not envisage a total return to the past.


"We are against a general price freeze, just as we are against a return to the old state-run command economy", he said Tuesday.


At the meeting, Chernomyrdin confirmed his solidarity with Russia's industrialist lobby, which has been pushing for a softer transition to the market.


"Yes, I am a former director, and I am proud of this", he said, drawing a round of applause. "Only together can we stop chaos from erupting in the country".


Chernomyrdin, a veteran energy industry executive from Orenburg in the southern Urals, also called for a "contract for better cooperation" between his government and the industrialists, reaffirming that his priority will be to halt the slump in industrial production. Last month he approved 200 billion rubles in new low-interest loans for the foundering energy sector. The assembled directors, meanwhile, circulated a resolution at the meeting asking the government to provide more cheap credits to bail out other sectors, and to relax the government's tax policies for large state-owned manufacturers.


Chernomyrdin said that his government would continue to help enterprises with credits while maintaining what he called "a-strict financial policy". This would be possible in part by increased enforcement of existing tax laws, he said. He also told directors, government credits should not be seen as a free handout.


"The directors have to keep up their end of the bargain, by raising demand for their goods", he said. "The goal is not to increase production, but to improve the situation in the country".