Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

City Hall Declares War on Prices

Prices on consumer goods are growing faster than inflation, and Moscow intends to do something about it.

City Hall said Wednesday it has drawn up a six-year program to weed out the middleman and provide breaks to discount shops in an attempt to harness soaring prices on food and nonfood goods.

"Retail prices on a number of food and nonfood products grew faster than inflation and leapt up to 150 percent last year," Deputy Moscow Mayor Valery Shantsev told reporters.

In the past decade, Moscow has moved from 88th place to 33rd in retail prices worldwide, according to City Hall.

Wholesale prices have remained stable in the past three years, but retail prices have kept growing, Shantsev said.

This is because of the number of middlemen that goods must pass through before reaching consumers, he said. Their markups can more than double the price of the goods by the time they are finally placed on store shelves.

"There is a need for state regulation," Shantsev said. "Unfortunately, we can only legally regulate retail prices on medicine, school meals and funeral services."

The program will support the growth of wholesalers and the development of the capital's wholesale network. The program also calls for the support of retail chains that target the middle and lower classes, such as Perekryostok, Dixi and Pyatyorochka. Such retailers try to deal directly with producers so they can keep prices low. Shantsev did not specify how City Hall plans to support them.

Some 23 percent of Moscow's official population of 9 million live below the minimum subsistence level and cannot even afford to shop in stores like Pyatyorochka, Shantsev said.

To deal with this problem, the program envisions the establishment of stores targeting the impoverished. Companies that run such stores will be given rent-free retail space and will not have to pay utility bills.

City Hall also hopes to keep prices down under a part of the program that envisions the opening of small stores on the first floors of apartment buildings. The city would charge low rent, and owners would have to sign a 15 to 20 year contract. "Otherwise no one would go for it," Shantsev said.

Alexei Krivoshapko, retail analyst in United Financial Group, said the program could provide welcome relief in a city that has prices that are up to five times higher than in the West.

"However, retail prices will stop growing and the margin will narrow only when the retail market becomes civilized, not because the Moscow government is subsidizing it," he added.