Moscow Plans Steep Price Rises for Consumer Goods : Economy: No timetable was given. Previous increases sparked angry protests, and the regime retreated.

Prices for food and consumer goods will rise sharply in the first half of this year as the Soviet Union moves toward a market economy, a senior government official said Wednesday.

Anatoly N. Komin, first deputy chairman of the State Price Committee, said that after years of delay, the government will shortly begin reducing its massive subsidies for virtually all consumer products and that many prices could rise 50% to 70%.

“In 1991, we will have to undertake very radical measures to improve the structure and the nature of retail prices,” Komin told the Communist Party newspaper Pravda. “We will have to increase the prices significantly for the bulk of consumer goods and, first of all, for food.”

Although Komin avoided giving a specific timetable or the size of the increases, he left no doubt that they are among the “tough decisions” President Mikhail S. Gorbachev has warned would be required of the nation this year if it is to emerge from its present economic crisis.

“Price increases have become mandatory,” Komin stated.

Prices have already been raised for industrial enterprises and on the wholesale market, and these will be passed on quickly to consumers, Komin said. Prices for fuel, energy, lumber and wood products were doubled on Jan. 1; the prices for steel and other metals were increased 50%, and those for machine tools and equipment 40%.

Although some radical market economists have urged the government to free the prices on all consumer goods except for a limited number of essential items and allow the market to set the new prices, Komin described this as “suicidal.”

“This would lead to even greater inflation, and unmanageable developments would deliver a crushing blow to the already weakened economy,” he said.

The government instead chose a system of “gradual, centralized price reform with mandatory compensation” for those receiving pensions, welfare payments or student scholarships.

“We believe that price increases of 50% to 70% will be normal,” Komin said.

This option, as Komin acknowledged, reflects the government’s decision to “manage” the transition from a centrally planned to a market economy, maintaining a large element of government control rather than allowing supply and demand to set prices.

“We need order, economic discipline and adherence to contract obligations,” Komin said. “Otherwise, we could lose even what little we still have, and the transition to the market system will be further impeded.”

The government has announced similar moves in the past--price reform is an essential step in the overhaul of the Soviet economy--but each time has retreated amid angry protests.

Last May, Prime Minister Nikolai I. Ryzhkov disclosed plans to triple the price of bread, among other price increases, but the Supreme Soviet, the country’s legislature, overruled him when panic buying emptied most stores in Moscow and other major urban centers. An attempt in November to free the prices of “luxury goods,” which ranged from jewelry and furs to car parts and furniture, was largely thwarted when republic governments refused to charge the new prices at their stores.

This time the government must follow through, for the subsidies required to maintain the low prices for food and other consumer products would jump from the equivalent of $162 billion a year at official exchange rates to an estimated $252 billion to $270 billion as the higher costs for energy, raw materials and transport are absorbed by the state budget, Komin said.

“No budget will sustain this burden,” Komin said. “A rise in prices is consequently inevitable.”

Even before these increases, the typical consumer product was sold for only four-fifths of the costs involved in its production, transport and sale. State subsidies made up the difference.

The country’s economic crisis worsened substantially, Komin said, as the old system of state ownership, central planning and government management was largely demolished--but the market economy with its reliance on entrepreneurship had not yet developed.

“There is an opinion that we are still sitting on two chairs at once--we use both central planning and the market system, unable to choose between them,” he said. “Let me say it in one phrase--we aren’t sitting on any chair.

“Even the most primitive stool has at least three legs to stand on, whereas we have none. We have completely destroyed the planning system and failed to offer anything to replace it. We have neither a development plan nor a state budget for this year. And, in my opinion, this is a shame for the country.”