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. Last Updated: 07/27/2016

City Frees Prices of 'Luxuries'

In a small step toward the free market, the Moscow city government has decided it does not need to control the prices of products like Coca-Cola and motorcycle parts to protect poor citizens from inflation.


The city has removed certain "luxury" items from a list of products deemed necessities. The city government had placed restrictions on these products that prevented shopkeepers and wholesalers from charging a markup of more than 25 percent.


Alexander Korolko, head of the Moscow government's department of price policy, said Monday that the city would now start looking more closely at the goods on which it places markup restrictions.


"Price on such luxury products as Pepsi and Coca-Cola do not need to be regulated", Korolko said. "If people have the money to pay, let them do it".


The official said that local governments had been given the power to limit markups on a whole range of consumer goods by the Gaidar government in October 1992 in a measure designed to protect disadvantaged Russians from the effects of inflation, which ran at over 2, 000 percent last year In January this year, the Moscow city government imposed restrictions on a list of goods ranging from basic food products like meat, milk and bread to children's clothing and consumer goods.


Last week the prices committee lifted the restrictions on some of the goods on the list, including soft drinks like Coca-Cola and Pepsi-Cola and motorcycles, bicycles and spare parts for them.


Korolko said that the restrictions were lifted in response to demands from traders.


He said his department conducted a survey on different groups of products and concluded that most markup limitations on luxury items should be lifted. The city has already dropped some restrictions on luxury meat and fish products.


He added, however, that the government will retain limitations for basic food items. For example, while Coca-Cola and Pepsi prices have been freed, the markup restriction still applies to Russian soft drink brands.


"For those, who can not afford an expensive Coca-Cola, there is plenty of Russian lemonade with a price that is still regulated", he said.


Vladimir Aksyonov, public relations officer for Coca-Cola in Moscow, said the decision had little immediate effect because the restrictions had never applied to imported goods and most Coca-Cola drinks sold in Russia were imported.


He said that two Russian factories produce Coca-Cola drinks and that the company had observed markup restrictions on these products.


Aksyonov said however that not all the traders followed the limitation rule and the price of locally made Coca-Cola varied all across the city.


The markup restrictions still remain in place on many goods, although many Western economists believe the free market should be left to determine all prices.