The government is creating a system to protect the domestic market from rising world prices for whole groups of goods: food (sugar, sunflower oil, grain, poultry, pork, milk, fish), ferrous and non-ferrous metals, fertilizers. About this “Vedomosti” was told by two sources close to the cabinet of ministers, and one of the participants in the meeting in the government, at which it was discussed.
The protection system will consist of two parts. The first is a model of regular forecasting of the cost of goods in world markets and its impact on the national market over the next eight weeks. The availability of these goods for their consumers will also be analyzed, for example, metals – for mechanical engineering, etc. The number of groups – “baskets”, the exact list of product nomenclatures, as well as their weights and accessibility criteria are now being discussed, said the source of Vedomosti, close to the government.
The second envisages the use of these estimates to prevent the heating up of domestic prices according to certain regulations. As soon as the predicted cost of a certain product crosses a certain “red line” (its parameters are being specified), response mechanisms will come into force, which also have yet to be finally determined. We are talking about duties, dampers, export restrictions, subsidizing production and sown areas, etc., one of the interlocutors of Vedomosti knows.
The system that the government is creating is required in order to avoid administrative measures to stabilize prices in the country that were unexpected for business, and to respond to risks with the help of market mechanisms, notes one of the sources of Vedomosti. According to him, the government, like business, is uncomfortable with operative intervention – both sides need predictability. “The idea is to create a methodology that shows if there are risks of price increases. Understanding the perspective, you can take market-based measures, and not go over to belated administrative intervention, ”- said a source close to the government.
The development of the system is supervised by First Deputy Prime Minister Andrei Belousov. It is being prepared by the Ministry of Economic Development with the participation of the Ministry of Industry and Trade and the Ministry of Agriculture. The analytical center under the government will process and interpret the data. The Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) will advise on the preparation of forecasts. The final concept should be presented to Prime Minister Mikhail Mishustin by the end of July.
The press services of the government apparatus, the Ministry of Industry and Trade and the Ministry of Agriculture did not respond to a request from Vedomosti. The representative of the Ministry of Economic Development said that the models, together with these departments, have been prepared and sent for revision to the government, specific parameters for monitoring and forecasting prices, as well as information sources are still being determined. TsMAKP confirmed that they are participating in the project. “We have developed a series of models that describe the dependence of prices in the national market on the situation in external ones. The specification is separate in each case, but it always reflects how domestic prices follow world prices: according to what laws, with what time lag, etc. “, Vladimir Salnikov, head of the real sector of the TsMAKPa, said to Vedomosti. According to him, the data of the customs service and exchange quotes are used in making forecasts. The former allow one to more adequately assess the situation, the latter – to respond to changes in the market situation on-line. In addition, the models provide for the reaction of prices of the final product to changes in the cost of production, Salnikov specified.
The think tank under the government also confirmed its participation, but refrained from additional comments.
In May, Belousov held a special meeting on the situation with prices for socially significant goods, a representative of the First Deputy Prime Minister said earlier. As a result, the Ministry of Economic Development, the Ministry of Agriculture and the Ministry of Industry and Trade were instructed to submit to the government a detailed description of the forecast assessment of the risks of rising prices for the population, as well as to form their target values based on fluctuations in the world market.
The situation is most acute in metallurgy. The rise in prices abroad and in Russia, which began in the fall of 2020, affected many metal-intensive sectors of the economy and influenced inflation, which reached 6.02% on an annualized basis in May. At the end of May, in an interview with TIme, Belousov said that metallurgists received super profits from the increase in the cost of their products on world markets and “pushed” the state by 100 billion rubles. At the same time, according to the Federal Tax Service, the tax burden on the metallurgical industry is one of the lowest and amounts to 5.4% versus 48% for the oil and gas industry and 12.6% for other extractive industries. The share of gross taxes (MET and customs duties) in the revenues of mining companies is one of the lowest in the industry and does not exceed 8%, while for oil and gas companies this figure varies from 40 to 60%, according to calculations by Vygon Consulting.
The leveling off of the situation gradually began. Last year, the severance tax in the extraction of raw materials for ferrous and non-ferrous metals due to the “rental coefficient” increased by 3.5 times. This will increase budget revenues by more than 100 billion rubles. in 2021–2023 Last week, the government approved a temporary – until the end of the year – increase in duties on the export of ferrous and non-ferrous metals. This will make it possible to collect an additional 160 billion rubles for the budget. The purpose of the measure is to compensate for the rise in the cost of projects in the field of state defense orders, housing construction, roads, etc., associated with an increase in metal prices, Belousov explained at a government meeting. Following the increase in customs duties, metallurgists are planning to increase the severance tax or profit tax, Vedomosti wrote on 25 June. Last December, the government froze sugar and sunflower oil prices through agreements with producers and retailers. Initially, they were supposed to operate until April, then the freeze was extended: for sugar – until June 1, and for butter – until October 1.
A sense of hope
Forecasting prices for basic agricultural products is long overdue, says Eduard Zernin, Chairman of the Board of the Union of Grain Exporters. He hopes that the government’s initiative will avoid any drastic regulatory measures in the future. This mechanism can be seen as an additional dialogue with the state, said a representative of Cherkizovo. Its launch would allow all participants in the process, assessing the situation with prices, to be ready in advance to make decisions that will take into account the interests of not only consumers, but also businesses, the source added.
The difficult situation in which the farmers find themselves, caused by the rise in prices for fertilizers and plant protection products, certainly needs to be resolved, said Andrei Neduzhko, general director of the agricultural holding “Step”. The mechanism proposed by the government can partially improve the situation of agricultural producers, he believes. The fact that prices will be predicted gives rise to a sense of hope, said a representative of the Ruslom association: “In our 20 years of experience, there is no perfect forecasting technique, even if we use neural networks. But any forecasting is a thousand times better than no forecasting. “
Russia has already successfully applied the principles of economic analysis of pricing practices developed by the Federal Antimonopoly Service, and this set of measures is sufficient, said the representative of the Russian Association of Fertilizer Producers.
The proactive economic policy of the authorities can only be welcomed, says Alexander Isakov, senior economist at VTB Capital. At the same time, in the medium term, the government could increase the economy’s resilience to shocks in commodity markets by stimulating hedging of commodity price risks, he added. In particular, through the development of a derivatives market for basic commodities. As a maximum – to subsidize the cost of buying such insurance at least at first, the economist suggested, at least – to allow the use of hedging costs in calculating taxes.
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