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Russia’s dilemma: price control or cash handouts to needy

February 18, 2015, 18:45 UTC+3 Alexandrova Lyudmila
© Artyom Geodakyan/TASS

MOSCOW, February 18. /TASS/. The Russian government already controls the prices of certain types of medicines and health care items and is considering whether this practice should be spread to socially significant foodstuffs. In the meantime, legislators have been calling for wider control of prices in general and a number of regions have already taken such measures at their own initiative. Experts are warning that this would hit the domestic producers and bring about Soviet-style shortages.

Russia’s State Duma members last week proposed two bills tightening state control of prices of medicines included in the list of vitally necessary and crucial ones, as well as on medical implants used in providing medical assistance.

"The medical supply situation is one of the most complicated ones. It remains in the government’s focus," Deputy Prime Minister Olga Golodets told Rossiiskaya Gazeta. "The key task is to control the availability of vital medicines. The list has been expanded and control is particularly strict. Whereas on the open market the prices of medicines have been up by 12-15% on the average, those of items on the vitally important list are kept under control."

Deputy Prime Minister Arkady Dvorkovich on Monday confessed that Russia’s prices of commodities had been up to a greater extent than we would like them to.

"Food prices have risen by 20-25-30%," Dvorkovich said on Russia’s TV Channel 1.

As he addressed State Duma members last month, Dvorkovich did not rule out a freeze on food prices in case of their prolonged growth by 30%. He added that the government had been cautious to use the legally envisaged machinery out of the fear of triggering shortages.

State Duma members have called for establishing a mechanism of state control of prices, restricting retail surcharge on socially important foods and obliging the retailers to supply the items on sale with both retail price tags and the manufacturers’ wholesale price labels.

The Moscow authorities have been reluctant to introduce restrictions on food prices so far — so as to avoid shortages, the chief of the retail trade and services department, Alexey Nemeryuk, said last week.

A number of other regions, though, have taken the first steps to set caps on the prices of essentials.

Attempts to control prices the way it was done in the Soviet era would lead to nothing good, cardiologist Alexey Erlikh told the daily Novyie Izvestia. "True, the prices of medicines can be prevented from rising, but very soon there will be nothing to buy, because the manufacturers will be refusing to provide medications at frozen prices." The expert believes the prices of medicines have grown not because of soaring market demand or attempts at profiteering, but because "medicines of domestic manufacture do not exist as such."

"The prices of medicines are already being controlled and the negative effects of that are obvious," agrees Vadim Novikov, a member of the government’s expert council for the promotion of competition. "We have no powers to force producers to manufacture medicines. If a medication is unavailable at all, nobody cares about the price at which it is unavailable."

The expert believes that the government will refrain from introducing the control of prices.

"It’s a bad idea: memories of what life with controlled prices and shortages in the Soviet Union was like are still fresh," he told TASS. "For instance, the prices of natural monopolies are controlled and in that sphere complaints are far more frequent than in the uncontrolled sphere."

Government control of prices will not make life easier, he said. "If prices are frozen then there will be no incentives for domestic production and shortages will become permanent."

"The poor people are to be helped in a different way - with cash, while price control would be an attempt to help one and all," he said.


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