Products will be conditionally free – Newspaper Kommersant No. 31 (7476) dated 20.02.2023
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The initiative of the State Duma to limit trade margins on essential foodstuffs did not find support from regulators. The Ministry of Agriculture and the Ministry of Industry and Trade believe that this could lead to destabilization of the economy and a deficit. The Federal Antimonopoly Service (FAS) considers the existing instruments of price control and voluntary restriction by the networks themselves to be sufficient. Thus, price regulation will not become official, but retailers will not be able to abandon self-restrictions either.
The Ministry of Agriculture does not see the need for state regulation of trade margins for essential foodstuffs. This follows from the response of the ministry to the State Duma resolution, which Kommersant has, following the report of the head of the Ministry of Agriculture, Dmitry Patrushev, made at the end of 2022. Then the State Duma recommended that the government consider setting marginal markups for such products at the level of 10-15%.
As noted in the response of the Ministry of Agriculture, a permanent limitation of margins is impossible without regulation of each stage of production and sale of products.
Additional state intervention in the industry, the letter says, can only “destabilize the economy by depriving producers and sellers of incentives, leading to tax cuts and shortages of goods.”
In addition, the Ministry of Agriculture clarifies, the government already has the right to impose price caps on individual products for up to 90 days with their growth by more than 10% within 60 days, excluding seasonality. The Ministry of Agriculture, the Ministry of Industry and Trade, the Federal Antimonopoly Service, and retail chains are also coordinating voluntary margin limits on some vegetables, dairy products, sugar, and bread. And with rush demand, chains can reduce markups to a minimum, limiting the sale of such goods per customer, as was the case with sugar in March 2022, the Ministry of Agriculture writes.
Analysts of Gazprombank in the review of the consumer sector dated February 17 named markup restrictions on the part of the state among the important risks for the industry.
They note that the draft law on establishing a marginal markup on socially important products up to 10% was considered in the State Duma for the first time in February 2022, after which large chains voluntarily reduced markups on some goods to 5%.
Chairman of the Presidium of the Association of Retail Companies (includes X5 Group, Magnit, Lenta, Auchan, etc.) Igor Karavaev says that instead of reducing the cost of goods for suppliers and networks, it is better to use targeted taxation tools, up to a reduced VAT rate on certain goods, a flexible credit policy, preferential rent and antimonopoly price controls.
The X5 Group advocates self-regulation, noting that it has also voluntarily capped markups on a product group, thereby assuming “various costs”. Magnit, Lenta and Auchan did not respond to Kommersant’s requests. The FAS reported in February that Auchan would continue to limit markups on certain products in 2023 as well.
Deputy Chairman of the Board of “Rusprodsoyuz” (includes “Mistral Trading”, “Russol”, “Dymov”, “May”, etc.) Dmitry Leonov says that the provision of targeted assistance by the state to the poor would eliminate the risks of state price regulation. In addition, he notes, it is important for market participants to move on to long-term supply planning, which will allow them not to include risks in prices.
According to Marat Ibragimov, senior analyst at Gazprombank, many socially important products are involved in traffic generation, and among these categories there are the cheapest goods, so chains can keep markups on these positions without significant harm to business.
According to him, with sluggish consumer demand, the issue of prices for essential products remains in the focus of regulators. Networks, apparently, will continue the practice of voluntary limits on markups, the analyst does not exclude.
The Ministry of Agriculture told Kommersant that the price situation in the food market is stable and they do not see the need to introduce regulation of markups. The Ministry of Industry and Trade believes that strict state regulation of prices on an ongoing basis can have a negative impact on the economy. And the FAS noted that the voluntary obligations of the chains made it possible to reduce the margin on the positions of the “first price” of 25 socially significant products to a minimum.
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