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. Last Updated: 07/27/2016

Bread Price Hikes Worry Mayor

Mayor Yury Luzhkov has responded to a sharp increase in bread prices in the capital this week by rejecting a plan to privatize the city's Soviet-era distribution network and then ordering a commission to bring him a plan for lowering prices and improving availability.

An official in the Mayor's office, announcing the moves Wednesday, said the price of bread rose an average of 20 percent at stores this week. The last increase was about 10 percent in May. A standard loaf of white bread now costs about 65 rubles.

Such increases, tolerated in other sectors of the economy, are worrisome to politicians when it comes to bread. In Russia, the price of bread has historically been tied closely to the public mood.

This concern was reflected in the unexpectedly long three-hour city meeting Tuesday which was assembled to discuss registering Moskhleb, the state bread distribution network, as a joint-stock company.

All the participants in the meeting "noted that the cost of a loaf is a social issue fraught with loud political resonances", Izvestia reported Wednesday.

The pro-reform Luzhkov rejected the privatization plan, which would have been a step away from state control, and ordered that he be presented within five days with a plan to improve the situation, according to Galina Sugak, a spokeswoman for the Mayor's Office.

The capital presently consumes about 2, 500 tons of bread per day, compared with about 2, 000 tons several years ago, Sugak said.

Rising demand is straining current production, and has prompted an agreement under which the government would supply the funds to upgrade one bakery this year and another four in the capital by 1995, Izvestia said Tuesday.

Bread prices are partially regulated at state bakeries through a system that limits profits: a bakery can charge up to 25 percent over its costs. An outlet can mark up the price another 15 percent.

As a result, prices still vary for consumers depending on production and delivery costs.