Soviets Found Unready for Industrial Reform : Program for Placing Plants on Profit-Loss Basis Hampered by Bottlenecks, Kremlin Aide Asserts

A top Soviet planner admitted Monday that many economic managers and workers are ill-prepared to deal with a program going into effect Friday aimed at putting major industries on a profit-and-loss basis.

Stepan A. Sitaryan, first deputy chairman of a new commission on perfecting management, indicated that because of this lack of preparation, the year ahead will be a kind of shakedown period for government ministries and enterprises.

Under the new program, advocated by Soviet leader Mikhail S. Gorbachev, factories that account for 60% of Soviet industrial production will switch to “self-financing” and “self-accounting.” The aim is to give each enterprise greater authority to decide what it will produce and at the same time require it to earn enough money to buy its supplies and pay its workers.

Workers’ pay will be geared to the success of their factories. Also, workers are to be consulted on the selection of their supervisors and other matters that in the past were left entirely to management.

No Regard for Cost, Quality

Gorbachev has complained that under the present system of central planning and control, the highest priority has been assigned to fulfilling the annual plan, regardless of how much the cost or how poor the finished goods might be.

By moving away from centralized industrial planning, he contends, the economy will become more efficient and turn out goods of higher quality.

Planner Sitaryan, in an interview with the Communist Party newspaper Pravda, cited what he described as two potential trouble spots: the timely delivery of raw materials and the share of profits to be allocated to the factory for its own use.

In a separate article, the news agency Tass pointed out that shortages are commonplace in the Soviet Union and that workers often stand idle waiting for deliveries.

“The chronic illness of the Soviet economy is hard to cure,” Tass said. “Many factories cannot manufacture, or market, their products without components delivered from dozens or even hundreds of contractors.

Controversy Over Profits

Sitaryan said the question of how profits are to be divided between factory and state has already stirred considerable controversy.

As projected, the most profitable factories will keep only a small part of their earnings, while plants that have lost money in the past will retain a greater part. According to Sitaryan, this formula appears to be self-defeating.

“The inertia of the old thinking is still too strong,” he said.

The Tass article explained that taxes paid to the state out of profits vary widely from industry to industry and are based mainly on past economic performance.

“A number of factories have come to the threshold of reform with a burden of debts and low profit rates,” Tass said. “The government has drawn up special economic recovery programs for them.”

Factory Success Story

Tass went on to cite a success story in a Moscow factory that took part in an experimental self-financing project this year. It said the Krasnaya Rabotnitsa plant realized profits far above its targets by modernizing its products and making deliveries on time.

As a result, Tass said, Krasnaya Rabotnitsa made enough money to pay off bank loans that it had made and to modernize its old factory.

But despite the experimental project, Sitaryan told Pravda that the coming year will still have an experimental quality about it, and that there is hope that industry will be ready for total conversion to the new system in 1989.

He cited one specific measure that will affect all the plants covered by the new law: Each worker, for the purpose of allocating costs, will be valued at 300 rubles (about $475) a year, or 200 rubles a year where labor is more plentiful. Thus factory managers will be aware that each worker must produce more than 300 rubles’ worth of goods each year in order for his or her enterprise to turn a profit.

Sitaryan said the new law will take effect with virtually no wholesale system of buying and selling, and with a “totally outdated” retail price system.

‘Illiteracy of Our Cadres’

“Much has been done for self-financing, but we have yet to liquidate the economic illiteracy of our cadres,” he said. “A special study at a number of the industrial enterprises showed that many (middle-level managers) do not have a clear idea of how the self-financing mode differs from what existed before. Workers do not know how the bonus funds are being formed. Even economic leaders flunked their exams.”

He said it is urgently needed “to start a real economic literacy campaign so that leaders of enterprises, specialists and workers can master all the levels of economic management under the new system.”