Starting in 2027, a new system for monitoring food prices will take effect in Russia. According to Denis Ternovsky, an expert at the Economic Policy Foundation, the government is gradually moving away from directly capping retail prices and is instead focusing on analyzing exactly where and why a product’s price is determined from the producer to the store.
In a comment for “Rossiyskaya Gazeta”, Denis Ternovsky explained that the previous mechanism of maximum retail prices, in effect since 2021, has in fact never been applied, despite repeated instances of sharp increases in food prices. According to the expert, this is due to a number of risks. In particular, calculating price increases based on seasonal factors at the regional level can lead to errors, disrupt the flow of goods between neighboring regions, and trigger local shortages.
The very idea of a single price cap for broad product categories also remains problematic. According to Denis Ternovsky, products within a single category can vary significantly in quality and price. For example, the price of different varieties of potatoes can differ by a factor of several times. If a general price cap is set based on a mass-market, low-cost product, more expensive varieties may simply disappear from store shelves.
Furthermore, existing regulations do not distinguish between domestic and imported products. For imported goods, the government’s ability to influence production costs is significantly limited; therefore, a strict cap on retail prices may lead not to a price reduction but to the product being withdrawn from the market.
The expert also draws attention to the composition of the list of socially significant products. In his assessment, some goods can no longer be considered staples for the least well-off segments of the population. As an example, he cites beef, which is increasingly becoming a premium type of meat. At the same time, carrots account for about 0.1% of household consumer spending, so the costs of regulating and monitoring them may exceed the potential benefits for consumers.
Instead of direct price caps, the government has in recent years used a softer approach—voluntary agreements with producers and retail chains. This approach was applied, in particular, to sugar and sunflower oil in late 2020. According to Denis Ternovsky, the results varied, but the agreements helped prevent prices from rising further without imposing strict price caps.
“The new food price monitoring procedure legally enshrines and builds upon this regulatory model. The government is shifting from analyzing prices as the result of the entire production-and-distribution chain to analyzing pricing within its individual components. This will make it possible to identify the sources of price anomalies and reduce information asymmetry between the regulator, producers, and retail chains,” noted Denis Ternovsky.
The new monitoring procedure essentially builds upon this very model. The government gains the ability not only to record price increases for products on store shelves but also to determine at which stage of the production-and-retail chain a price anomaly arises. This should create more favorable conditions for potential agreements.
At the same time, the new mechanism does not, in and of itself, compel companies to enter into such agreements. Denis Ternovsky believes that voluntary agreements could serve as a kind of “carrot” for businesses, while the government’s right to set maximum retail prices will remain as a potential “stick.”