The Soviet government has sharply increased prices on all construction materials, nonferrous metals, paper and cotton products and a series of consumer items in what seems a prelude to economic changes planned by the new leadership in the Kremlin.
Well-informed sources said the prices of timber, cement, steel and other construction materials were increased by nearly 100 percent effective Feb. 1. The move is bound to bring about a slowdown in construction activities.
The price increases also involve items ranging from certain cereals and alcoholic and nonalcoholic beverages to tools, technical instruments and telegraph and mail services.
Although foreign analysts suggested that the immediate objective may be to ease pressures on the economy, the move suggested that the new leadership under party leader Yuri Andropov may be moving toward economic adjustments that would assign a far greater role to the use of price mechanisms in this centrally planned economy.
Speaking to the workers of a Moscow machine tool factory 10 days ago, Andropov said that while the government was opposed to price increases "as a general strategy" to solve current shortages, "we must say that we do have certain price imbalances and incongruities and we are going to have to put them right."
The new price increases also reflected a government effort to make adjustments to an inflationary spiral that Andropov in effect acknowledged when he said that while output was declining, wages have remained the same.
"If you look from the standpoint of the national interest," he told the workers, "you will see a discrepancy between offered goods and money in people's pockets."
Apart from his insistence on greater labor discipline and increased productivity, the new government's overall strategy is seen as moving primarily in the direction of improving agricultural output. Some specialists see the price hikes as a way to raise funds for fiscal incentives planned for agriculture.
While the Soviet Union has a centrally planned economy, prices still play a role in the day-to-day movement of goods. A company that builds a new loading dock, for example, still has to "buy" the materials from another company, even though both are state-owned.
Many companies and collectives also make profits under the current system and many will use these excess funds for recreational improvements for employees.
By forcing price increases, the Kremlin will make many managers think twice before using funds for discretionary projects that take goods out of the economy but have little immediate impact on productivity. At the same time, the central planners will have more funds available to shift to agricultural use.
There has been no official announcement about the increases. A visit to various stores revealed that, for example, the price of a roll of toilet paper has gone up to 48 kopeks from 28 kopeks last month. The price of a bottle of mineral water has increased by 25 percent. Most other consumer items affected have price tags roughly 30 percent higher than last month.
The prices on basic foodstuffs such as bread, butter, and meat were not affected. However, press accounts suggest that the price of bread may be increased.
In a related development, the government was reported to be considering an increase in taxes on private automobiles. A government decree published last night imposed mandatory insurance on all privately held structures such as country homes, single family dwellings, garages and similar buildings.
As of Jan. 1, the government has moved to boost agricultural production in two ways, both of which suggest a move toward financial incentives to the farmers.
One is that the authorities have encouraged the emergence of a "cooperative" market at which food products could be sold at prices roughly 50 percent to 75 percent higher than those in state shops.
The cooperative market involves sales outlets of state and collective farms. According to press reports, one kilogram (2.2 pounds) of meat sold for two rubles in state shops is being sold for 3 1/2 rubles at the cooperative shops.
By encouraging the cooperative market, the authorities are seeking to provide incentives to state and collective farms to make higher profits and at the same time provide food to the population.
The other incentive involves higher procurement prices on agricultural commodities that went into effect Jan. 1. In this command economy, the government buys directly all agricultural production from state and collective farms at prices set in Moscow. The total amount of money paid to the farms last year was 56 billion rubles or $71 billion.
The government has decided to increase by 28 percent the funds allocated for purchases of the same amount of foodstuffs this year. The total allocation is 72 billion rubles or nearly $99 billion.
The new price increases are believed to have been designed to provide the treasury with additional funds to cover this increase.
The financial incentives are in sharp contrast to the previous Soviet practices when the government poured vast amounts of money into the agricultural sector without achieving any results.
Although the measures adopted thus far do not constitute a major reform of the Soviet system, the Russians seemed to be moving toward greater reliance on market mechanisms.
As it stands now, the Soviet economy has maintained artifically constant prices on various commodities and on rents, eletricity and gas for the past five decades.