Translated material
food chain
Food inflation in Russia was accelerated by too rapid growth in income
The government is trying to learn from the record surge in food prices this fall and, not wanting a repeat of the sad experience next year, is taking preventive customs and tariff measures. Yesterday it became known that the Ministry of Economic Development submitted to the government a proposal to reduce import duties on vegetables and vegetable oil from 15 to 5% from January 1. Meanwhile, the Russian government was forced to admit that the rapid increase in food prices this year (as well as for other goods, for example, building materials) is due not only to external, but also to internal factors. Moreover, one of them is too rapid growth in incomes of the population .“The reduction in duties will apply to all types of vegetable oil imported into Russia,” the ministry said. As for vegetables, such a measure, the representative of the Ministry of Economic Development and Trade emphasized, has been taken for the second year. The reduced duty rate on vegetables will be valid until July 1 next year.
The government began to actively apply customs and tariff measures in order to saturate the domestic market this fall due to a sharp rise in food prices, one of the main reasons for which was the unfavorable price situation on world markets. Import duties on milk and dairy products were reduced from 15 to 5% and duties were introduced on the export of wheat (10%) and barley (30%). In addition, grain interventions began on October 29. Let us remind you that, according to official data, the increase in prices for milk and dairy products since the beginning of the year amounted to 25%, butter - 29.2%, cheeses - 42%, flour - 31%, bread - 21.1% , sunflower oil - 43%, eggs - 18.2%. In addition, last week, through the mediation of the Ministry of Agriculture, major food producers and sellers signed an agreement to freeze prices for socially important food products. These are recognized as wheat and rye bread, milk with at least 1.5% fat content, kefir with 1% fat content, sunflower oil and chicken eggs. For now, the agreement is valid until January 31, 2008. True, according to Deputy Prime Minister and Head of the Ministry of Finance Alexei Kudrin, prices were frozen at their very peak.
Rosselkhoznadzor is also trying not to find itself in the rearguard of the fight to stabilize prices. Last week, he allowed the supply of cheeses and milk powder to Russia from two more Ukrainian enterprises, lifted restrictions on the import of meat and dairy products from a number of Brazilian meat processing enterprises, as well as live poultry, eggs, poultry meat and all types of poultry products from Hungary. And yesterday Rosselkhoznadzor allowed supplies of dairy products from Bulgaria, which were limited in 2006 due to the detection of cases of dangerous diseases in this country. The permit was issued under the guarantee of the Bulgarian National Veterinary Service to ensure the safety of exported food products.
Meanwhile, the government is beginning to recognize that the rapid rise in prices this year is due not only to external, but also to purely internal factors.
Firstly, conditions for competition in local markets were not created, not to mention the conditions for high rates of development of agricultural production. Since 1999, it has grown by only 20%, while the volume of food consumption has increased by 2.4 times. By the way, in the European Union, inflation due to rising food prices will increase by only 0.4% - from the usual 2 to 2.4%.
Secondly, in the pre-election year the authorities decided to significantly weaken budget policy. Yesterday, the head of the Ministry of Economic Development and Trade, Elvira Nabiullina, said that “the government, primarily the Ministry of Finance and the Central Bank, is closely monitoring that the growth of budget expenditures does not exceed the level beyond which they begin to affect inflation.” However, this year it was clearly not possible to keep track, which Finance Minister Alexei Kudrin actually admitted last Friday. According to him, even without the jump in food prices, inflation this year would have exceeded the forecast (8%) and reached the level of “9%, at least.” And taking into account food, according to his estimates, it will go beyond 10% (as of October 22, the increase in consumer prices since the beginning of the year was 8.9%).
As Mr. Kudrin says, the monthly increase in core inflation reached 2.5%. This was a consequence of excess money supply in the market, which appeared, among other things, as a result of faster growth in household incomes than growth in labor productivity. According to the Deputy Prime Minister, the increase in incomes of Russians to some extent stimulated the rise in prices, since the population “was ready to buy food at higher prices.” As a result, he said, “personal income, supported by high government revenues, only fueled the price of food.” In his opinion, in order to curb inflation, it is necessary to link the growth of household incomes with labor productivity, and also to limit ourselves to the already adopted social measures to support the poor (among these measures is the “unscheduled” pre-election increase in pensions and disability benefits proposed by the president from December 1, 2007). At the same time, Mr. Kudrin recalled the experience of European countries, where often when food prices rose, the trade unions themselves decided to curb wage growth.
Russia is not alone in trying to use administrative measures to bring down prices in food markets. As Jacques Diouf, Director General of the UN Food and Agriculture Organization, said in an interview with the British newspaper “Financial Times”, the ongoing dynamics of rapid growth in food prices in the global economy is turning into a serious social problem affecting all countries of the world. "Many countries will be forced to make difficult decisions as a result of rising agricultural prices," Mr Diouf said. Some countries will introduce price controls, others will eliminate tariffs on food imports to minimize the impact of rising prices, and others will increase food subsidies, he said. “If prices continue to rise, I would not be surprised if there are food riots,” Mr. Diouf said, recalling that rising food prices sparked civil unrest in Mexico, Yemen and Burkina Faso last year.
"Rosspirtprom" "drank" 15 enterprises?
In 2005-2006, the Russian Federation lost shares in 15 alcohol enterprises due to the lack of proper control on the part of the Federal State Unitary Enterprise "Rosspirtprom" over the enterprises entrusted to it with the right of operational management, RIA Novosti reports with reference to the press service of the Accounts Chamber of the Russian Federation. The board of the Accounts Chamber of the Russian Federation reviewed the results of the audit of Rosspirtprom last Friday, and auditor Valery Goreglyad made a report.
The materials submitted to the board note that, according to the decree of the Government of the Russian Federation of May 6, 2000, “On the establishment of the federal state unitary enterprise Rosspirtprom,” stakes in 105 joint-stock companies of the alcohol and liquor industry were to be transferred to the operational management of the enterprise. “However, according to As of December 31, 2006, FSUE "Rosspirtprom" was assigned with the right of operational management shares of a total of 80 joint stock companies, of which, in accordance with the requirements of paragraphs 2.1 and 2.2 of Article 11 of the Federal Law "On state regulation of the production and turnover of ethyl alcohol, alcoholic and alcohol-containing products" (came into force on January 1, 2006) the authorized capitals of only 34 joint-stock companies are shown," the control agency said in a statement.
These provisions provide that the production and turnover (except for retail sales) of alcoholic products containing ethyl alcohol more than 15% of the volume of finished products (except for the production of vodka) may be carried out by state-owned enterprises that have a paid-up authorized capital of at least 10 million rubles. Vodka production has the right to be carried out by state-owned enterprises that have a paid-up authorized capital of at least 50 million rubles.
During the audit, auditors found that representatives of FSUE Rosspirtprom in the management bodies of joint-stock companies “in a number of cases did not ensure proper effective control over all aspects of production and financial and economic activities,” the Accounts Chamber notes. According to the control agency, this led to a decrease in the financial results of joint-stock companies, and in some cases to their bankruptcy.
An analysis of the financial condition of joint-stock companies carried out by auditors showed a negative trend in accrued dividends on blocks of shares assigned to FSUE Rosspirtprom. “So, the total amount of accrued dividends for 2006 amounted to about 11 million rubles, or 44.5% compared to the level of 2004 and 66.2% compared to the level of 2005. Moreover, if at the end of 2004 dividends were accrued by 23 joint-stock companies, then at the end of 2005 - 13, and at the end of 2006 - only three," the report says. As the audit showed, at the end of 2006 only 18 enterprises were profitable, 20 enterprises suffered losses. At the end of 2006, there were 15 enterprises in bankruptcy proceedings (in 2005 - four enterprises), the Accounts Chamber reports.
“Thus, the Russian Federation actually lost stakes in 15 enterprises in 2005-2006 alone. The value of only one of them - JSC Biochemical Plant Kavkazsky as of October 2006 was no less than 172 million rubles,” - the message says. The board decided to send an information letter to the government of the Russian Federation and a submission to the Federal State Unitary Enterprise Rosspirtprom.