Oleksandr Klymenko Official website
Articles | 165 | 25.11.2016

Who is to blame for the price raising and why does bread rise in price?

The government of Groisman decided to hold another experiment in taking last funds away from Ukrainians. It is known that on October 1, the power cancelled the price regulation on social products, i.e. food, which is usually bought by citizens, who have the lowest level of income.

Let me remind, the power had grandiose plans. The government predicted reducing of prices as a result of this innovation. There were the following arguments: producers and sellers would save hundreds of millions each month due to the fact that they would not pay bribes to officials during the coordination of costs and extra charge for products.

This project is pilot. It is designed for functioning during the three months. However, according to practice, it could be stated that its time intervals will be delayed. For instance, introducing the temporary war tax in August 2014, which, probably, will not be cancelled by power.

Anyway, nowadays, we can say without doubts that the forecast of the government (it is not surprising) has failed to materialize. The goods have not become cheaper. Its price has risen.

Here are the simple reasons for it:

  • either producers or sellers paid a large sum in order to cancel such regulation, which was «required» by officials;
  • greed of owners, who obtain excess profit and withdraw it to the offshores;
  • statistics authorities do not demonstrate the real situation related to inflation and decrease it by any means.

When the government was cancelling price regulation in favour of oligarchs, it did not think about support of poor people. First of all, it comes about pensioners. 70% of them receive minimal pension, which is amounted to UAH 1130 or USD 43,8.

I would like to offer to demonstrate price raising through the bread – the good #1, which is hardly affordable for Ukrainians.

According to data of statistics, by November 21, the average price of rye-wheat and rye bread in Ukraine is amounted to UAH 10,42. It means that bread has risen in price by 23 kopecks compared with September 30.

Here is an interesting picture: the power states about record collection of grain crops in 2016, namely, 64 million tonnes. The world prices on grain has fallen (for instance, wheat – from USD 200 to USD 180 per ton). At the same time, the price of bread on internal market is increasing for citizens. It is only the beginning.

By the end of 2016, the All-Ukrainian Baker’s Association predicts the growth of price on bread by 15-18% due to increasing of cost price of its producing. It comes about price raising of natural gas, electricity, logistics services as well as price raising on flour.

In addition, besides the price raising on flour was caused by strengthening of fiscal pressure on producers of grain.  It comes about the partial cancellation of special regime of the VAT taxation for agricultural producers (its full cancellation will take place in 2017) and increasing the single tax for producers twice.

Thus, the average price of a loaf of bread will be around UAH 12 in nearest future.

Yesterday, the Antimonopoly Committee of Ukraine was interested in first wave (current) of price raising on bread. They believe that it is necessary to carry out the inspection due to the fall of demand on bread.

Nowadays, I can say that the analysis of the Antimonopoly Committee of Ukraine will not have null result. It will not make Groisman to reduce prices on bread, but it will make it cheaper.

In the preview of the inspection, representatives of the Antimonopoly Committee of Ukraine gives a hint and indicates: “Who is guilty in it? 95% of flavour milling enterprises in Ukraine are private”.

However, it would be reckless to accuse in absentia these enterprises due to the fact that the main reason for price raising on bread (the second wave of price raising is not fat away) is politics, which is carried out by the government of Ukraine.

The power directly stated via the experiment: the market is a regulator. Thus, the market reacted this way. Do you have any other questions? All the questions should be addressed to the Prime-Minister!

Meanwhile the power wants to take the last things from Ukrainians, the «Uspishna Kraina» party knows, how to resolve this problem.

The draftlaw of the new Tax Code, which was prepared by us, offers to reduce the VAT rate by 15% and fix it on the level of 5%. In addition, we believe that it is necessary to establish ultimate level of profitability on vitally important goods and service. This receipt is simple, but effective. If it was implemented, the situation would be resolved.

I would like to provide an instance of foreign experience. Thus, in France, nearly 20% of prices are regulated by the state. In Japan, there is an ultimate level of profitability of rice, wheat, meat and milk products, railway tariffs, tariffs on water, electricity and gas, education and medical care. In Austria, Denmark and Norway, there are special laws in the field of price formation, which fix maximum consumer prices on separate groups of goods. There is plethora such instances.

Using the practice of our colleagues from other countries, own achievements, knowledge and experience, we – the «Uspishna Kraina» – are confident that our economy should be socially-oriented. We will be able to increase standards of living of our citizens via the prices and tax regulation!

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