
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, February 15, 1991                   TAG: 9102150010
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-2   EDITION: METRO 
SOURCE: The Washington Post
DATELINE: MOSCOW                                LENGTH: Medium

GORBACHEV FACES STRUGGLE OVER DOUBLING OF PRICES

The legislature of the giant Russian republic Thursday rejected central government proposals for sharp increases in the prices of food and basic consumer goods over the next two weeks, setting the stage for a new trial of strength with Soviet President Mikhail Gorbachev.

Russian Information Minister Mikhail Poltoranin said in an interview that the increases - which include some doubled and tripled prices - are likely to go into effect by March 1. He predicted they would lead to a "social explosion," with workers staging strikes and other protests across the Soviet Union.

The price rises are the most controversial element in a package of measures, now under review by the central government, intended to stave off economic collapse. Soviet prices have been artificially fixed for decades, with the result that more than one-third of the federal budget is now spent on subsidizing food and other consumer goods.

The Russian Parliament went into closed session Thursday to hear details of the government's long-awaited price increases. Deputies said the proposals included a threefold increase in the prices of meat and bread and a doubling in the prices of eggs and vegetable oil. Other proposed increases include 130 percent for milk, 80 percent for air fares and 75 percent for household appliances.

The government newspaper Izvestia reported that the central authorities were proposing to compensate citizens fully for rising food costs and partially for other price rises. In theory, this money would come from the budgets of the 15 Soviet republics, but Poltoranin said Russia cannot afford such huge outlays.

Most Soviet economists regard the price rises as inevitable, given the fact that the amount of rubles now in circulation vastly outstrips the supply of goods and services. But many are skeptical that the proposed increases will promote the government's declared aim of building a market economy in place of the discredited system of central planning.

Nikolai Petrakov, a former economics adviser to Gorbachev who resigned last month, said in an interview that the government is still making the mistake of trying to fix prices artificially. He said he had fought a losing battle to persuade the president to free prices while preventing hyperinflation through tight controls over the money supply.

The Soviet Parliament late last year rejected a plan advocated by Petrakov and other liberal economists aimed at laying the foundations for a Western-style market economy in 500 days through the massive sale of state assets. Government ministers had predicted that the proposals would lead to massive unemployment and runaway inflation.

Poltoranin said the central authorities were trying to shift political responsibility for the administrative price rises onto the parliaments of the republics, but that the attempt would be unsuccessful. He said Russian President Boris Yeltsin had indicated that he would rather resign than sign a decree agreeing to the price rises.

"Gorbachev now has no alternative. He will have to raise prices, but he will also have to take responsibility for this move because he wrecked the 500-day program," said Poltoranin, a close adviser to Yeltsin.

by CNB