Dairy

23/ 09/ 2016

On 22 September 2016 the Cabinet of Ministers of Ukraine adopted Resolution “On the implementation of the pilot project regarding temporary cancellation of the CMU’s Resolutions №1548 of 25 December 1996 and №1222 of 17 October 2007. In course of the last 10 years a system of state price regulation of so called socially important goods had place in Ukraine, whereas the state regulated maximal price levels, profitability and trade margins, wholesale prices for a big number of foodstuffs, as well as obliged the producers to mandatory declare the price change in case of its increase by more than 1% within a month. Such an outdated and economically unjustified system not only slowed down the competition development and investment inflows, but also did not prevent prices increase for the goods subject to regulation, since the prices for those goods have been increasing faster than for non-regulated ones. During the last several years the issue of cancellation of state price regulation has been remaining among the key priorities on the EBA’s agenda, since it caused the reduction of production of socially important goods or their deficit at the market, distorted competition, created unnecessary administrative burden, made it impossible to effectively react on market changes and, as a result, led to the loss of competitiveness and investment attractiveness of Ukraine. In particular, it was also a great field for corruption. In its efforts to fight the regulation, the EBA has numerously appealed to the previous Governments, as well as to the current one, requesting to cancel the price regulation and provided all necessary arguments about the negative impact of such system and its damaging effect both on business and on population. And only now, at its last meeting on the 22 September, the Government finally undertook a real step by adopting the pilot project. European Business Association expresses its sincere gratitude to the Prime-Minister of Ukraine Volodymyr Groisman, Minister of economic development and trade Stepan Kubiv and to the whole team of experts who took many efforts in order to dismantle the unnecessary state intervention into the economic process. This will allow reducing administrative burden on business and red tape, facilitating deregulation and free competition which, in turn, will provide for the quantity, quality and fair price of the goods. Legal background: Cabinet of Ministers’ Resolution “On establishment of powers of executive authorities and executive bodies of local councils regarding prices regulation (tariffs) №1548 of 25 December 1996 (CMU and CMU Resolution №1548, accordingly) fixed the powers of central executive authorities, regional and local state administrations regarding the regulation (establishment of fixed and maximal price levels (tariffs), trade markups, profitability levels, mandatory declaration of price changes) of prices and tariffs for a number of foodstuffs, including milk, sour cream, quark, butter, poultry meat, eggs, sugar etc. Cabinet of Minsiters’ Resolution “On establishment of the Procedure of declaration of wholesale price changes for foodstuffs” №1222 of 17 October 2007 (CMU Resolution №1222) fixed the procedure of declaration by economic operators of changes of wholesale prices for wheat flour of extra, first and second grade, buckwheat, beef, pork, quark with fat amount up to 9%, sour cream with fat content up to 20%, butter with fat content up to 72,5%, eggs, sugar, vegetable oil in case when price has been increasing by more than 1% within a month. CMU Resolution “On implementation of the pilot project regarding the temporary cancellation of CMU Resolution №1548 of 25 December 1996 and CMU Resolution №1222 of 17 October 2007 provides for temporary cancellation of the mentioned Resolutions starting from 1 October 2016 and thus, for cancellation of state price regulation for those foodstuffs.

In course of the last 10 years a system of state price regulation of so called socially important goods had place in Ukraine, whereas the state regulated maximal price levels, profitability and trade margins, wholesale prices for a big number of foodstuffs, as well as obliged the producers to mandatory declare the price change in case of its increase by more than 1% within a month. Such an outdated and economically unjustified system not only slowed down the competition development and investment inflows, but also did not prevent prices increase for the goods subject to regulation, since the prices for those goods have been increasing faster than for non-regulated ones.

During the last several years the issue of cancellation of state price regulation has been remaining among the key priorities on the EBA’s agenda, since it caused the reduction of production of socially important goods or their deficit at the market, distorted competition, created unnecessary administrative burden, made it impossible to effectively react on market changes and, as a result, led to the loss of competitiveness and investment attractiveness of Ukraine. In particular, it was also a great field for corruption.

In its efforts to fight the regulation, the EBA has numerously appealed to the previous Governments, as well as to the current one, requesting to cancel the price regulation and provided all necessary arguments about the negative impact of such system and its damaging effect both on business and on population. And only now, at its last meeting on the 22 September, the Government finally undertook a real step by adopting the pilot project.

European Business Association expresses its sincere gratitude to the Prime-Minister of Ukraine Volodymyr Groisman, Minister of economic development and trade Stepan Kubiv and to the whole team of experts who took many efforts in order to dismantle the unnecessary state intervention into the economic process. This will allow reducing administrative burden on business and red tape, facilitating deregulation and free competition which, in turn, will provide for the quantity, quality and fair price of the goods.

Legal background:

Cabinet of Ministers’ Resolution “On establishment of powers of executive authorities and executive bodies of local councils regarding prices regulation (tariffs) №1548 of 25 December 1996 (CMU and CMU Resolution №1548, accordingly) fixed the powers of central executive authorities, regional and local state administrations regarding the regulation (establishment of fixed and maximal price levels (tariffs), trade markups, profitability levels, mandatory declaration of price changes) of prices and tariffs for a number of foodstuffs, including milk, sour cream, quark, butter, poultry meat, eggs, sugar etc.

Cabinet of Minsiters’ Resolution “On establishment of the Procedure of declaration of wholesale price changes for foodstuffs” №1222 of 17 October 2007 (CMU Resolution №1222) fixed the procedure of declaration by economic operators of changes of wholesale prices for wheat flour of extra, first and second grade, buckwheat, beef, pork, quark with fat amount up to 9%, sour cream with fat content up to 20%, butter with fat content up to 72,5%, eggs, sugar, vegetable oil in case when price has been increasing by more than 1% within a month.

CMU Resolution “On implementation of the pilot project regarding the temporary cancellation of CMU Resolution №1548 of 25 December 1996 and CMU Resolution №1222 of 17 October 2007 provides for temporary cancellation of the mentioned Resolutions starting from 1 October 2016 and thus, for cancellation of state price regulation for those foodstuffs.

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