Soviet Economic Shift to Double Food Prices : Reforms: The Presidential Council approves change from socialism to a system of supply and demand.

The Soviet government’s top policy-making council Tuesday approved a package of economic reforms that will double food prices in coming months as part of the country’s shift to a market economy based on supply and demand.

The Presidential Council, concluding months of spirited debate within the government and the ruling Communist Party, endorsed a program of fundamental but controversial reforms that will transform the country’s socialist economy after decades of state ownership, central planning and extensive subsidies.

Increases in consumer prices, including those for foodstuffs, will be a major element in the program’s efforts to reduce the government’s huge budget deficit, eliminate most subsidies and gradually introduce prices for all products based on the real costs of production and on market demand.

With farmers to be paid at least 50% more for most of their crops this year as an incentive to produce more food, grocery prices will double on average as many existing subsidies are eliminated, according to a government briefing paper prepared for Soviet lawmakers.

Most of the reforms will not begin until next year and then only after extensive public and legislative debate, according to the briefing paper. Once begun, they will be phased in over five years, not two, as previously discussed.

Outlining the basic reorientation of the economy, the paper asserts that only prices set by the market forces of supply and demand--the huge, unsatisfied demand for foods and virtually all other consumer products as well--will encourage increased production.

The prices for most basic foods, including bread, meat and dairy products, will remain under government control, with sharp but limited price increases, according to the briefing paper. Other items, among them coffee, tea, jams and most canned, frozen and prepared foods, will soon jump to four, five or six times their present level.

A new pricing system will begin to operate fully in January, officials said Tuesday. About 60% of all prices, including those for fuel, electricity and the products of heavy industry, will still be set by the state, though they will be higher. About 25% will be controlled indirectly by the state, and 15% will be without control.

The officials said this proportion will gradually shift, however, in favor of uncontrolled prices so that the domestic market as a whole is in balance in 1992, with prices high enough to encourage producers, whether in industry or agriculture or services, to supply whatever the market demands.

The Presidential Council met jointly with the new Federal Council, made up of representatives of the country’s constituent republics, to conclude what had become an increasingly acrimonious debate.

President Mikhail S. Gorbachev, opening the meeting, said that many aspects of the new program had been rethought in recent weeks because of the sharp criticism of its heavy impact on most of the country’s workers.

‘Some weak points still remain on the tactics of achieving its goals,” Gorbachev acknowledged in a short segment shown on state television. “But the time has come to act. We have to finish the first stage and hand it over to the Supreme Soviet and to society for discussion.”

The intent of the change, however, remains the same: “It is necessary to move resolutely toward the market, opening space for entrepreneurial activity and new forms of economy,” the official news agency Tass said.

Prime Minister Nikolai I. Ryzhkov will outline the program on Thursday to the Supreme Soviet, the country’s legislature, and the government is planning to launch a nationwide information campaign today to persuade people of the need for strong measures to pull the nation out of its deepening economic crisis.

The price increases drew immediate criticism from some lawmakers, and the whole program seems certain to face strong opposition if salaries are not raised to match.

“The entire meaning of this program is to ask the people to agree to raising prices by two or three times, to tighten their belts,” Gennady Filshin, secretary of the Supreme Soviet’s economic planning and budget commission, commented. “I do not think the people will accept that.”

Filshin argued that the sharp increases are, in effect, “just another ploy to intimidate people with the idea of the free market” and thus build up resistance to broader reforms.

Summing up the discussion by the Presidential Council, Tass stated that the government has “thoroughly assessed the possible impact of introducing market relations” on living standards.

There would be partially compensating increases in pay, for some as much as half the increase in the cost of living, but only 15% for others, according to Tass, with a “system of social protection” for low-income families.

The program’s overall intent, however, is to push not only the Soviet economy but the nation as a whole, for the first time in its history, into an entrepreneur-led, market-driven, profit-motivated orientation. Most here acknowledge that the change will be acutely painful but probably is necessary in some degree.

In approving the program, the Presidential Council said that “all principal aspects of the forthcoming reforms, especially the level and correlation of prices, must become a subject of public discussion,” Tass reported.

The council said the debate must focus on both the need to switch to a market economy--a highly contentious issue itself--and various ways of doing so.

“The planned restructuring of the economy will be possible only under conditions of a nationwide consensus on this major topic,” Tass reported, summing up the discussion.

The reforms should “take into full account the unequal starting conditions from which some of the republics and regions start in moving into market conditions,” Tass said, referring obliquely to the many areas of the Soviet Union where conditions are roughly equal to those in developing countries.

Although Gorbachev had won agreement more than two years ago for the basic principles of the economic transformation, the implementation has been held up by the complexity of such a sweeping and unprecedented change, the growing realization of the cost that every Soviet family would have to pay and the resulting social tensions.

The measures begin with a basic declaration of principles that will guide the Soviet economy as a market-oriented system in the future, well-informed sources said, and this will be presented to the Supreme Soviet in the autumn for adoption.

This declaration will be supplemented, the sources said, by eight other laws altering the foundation of the Soviet economy. Among them will be these:

Farmers will be taxed “in kind,” with the state taking a portion of their crops for sale in lieu of income taxes.

The monopolies now enjoyed by state enterprises will be broken up to permit domestic and foreign competition.

Foreign investors will be offered greater incentives to enter the Soviet market as competitors.

A banking system will be established in an attempt to attract savings and capital deposits with higher rates of interest and then redeploy those funds productively.

Further measures, perhaps another 10 or 12, will be introduced later, and Gorbachev is expected to use his broad presidential powers to issue decrees to act ahead of formal legislation and later to supplement those laws.

In addition to raising prices for agricultural produce, a key move in promoting economic reform, the government is now preparing to establish a market that will encourage the construction and sale of private housing under a decree issued by Gorbachev over the weekend.

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