11 february 2011

Prime Minister Vladimir Putin meets with Governor of the Republic of Mordovia Nikolai Merkushkin

The prime minister and the governor discussed the results of the republic’s socio-economic development last year. The governor also highlighted major challenges facing the republic, including the need to create new, high-paying jobs. Among the issued discussed was the efficiency of purchasing grain at the grain exchange.

Transcript of the beginning of the meeting:

Vladimir Putin: Mr Merkushkin, I looked at last year’s statistical data. The industrial production rate in your region is almost three times the Russian average. This is a very good rate. Agricultural production is down slightly, but livestock production has increased. 

Nikolai Merkushkin: By 14%

Vladimir Putin: Yes, I see. There are also some large and promising investment projects in agriculture, specifically in the livestock sector. There are also projects in cement production, fiber-optics, and railcar part casting. In other words, there are many interesting and ongoing projects.  

Nikolai Merkushkin: In line with the import substitution decree that you recently signed, we are building a very large cheese production plant. 

Vladimir Putin: What are the main problems you are facing?

Nikolai Merkushkin: Problems. We do have them and mainly with respect to new production facilities. We are trying to create new jobs, but there are many facilities that continue to use obsolete equipment and that face enormous difficulties in the market, as a result. Naturally, people are losing jobs, and therefore creating new well-paid jobs is our major problem.

Our goal is to create additional high-paying jobs, and hopefully the new projects will help us achieve this task. However, the unemployment level in the region is not very high. But this is also due to our proximity to Moscow. Many people move there in search of work, which results in a lower unemployment rate compared to the country average. We want people to have jobs locally with wages comparable to those in Moscow, so that people can stay and work for the benefit of their home region…

Vladimir Putin: And receive higher salaries. Hopefully, these new investment projects will help achieve this goal.

Nikolai Merkushkin: Yes. There are also some problems in agriculture. Specifically, the drought has had a significant impact on the forage availability. We have the largest amount of livestock in Russia and it needs to be fed. In January, the year on year meat production increased by 50%. And this is an ongoing trend. During the same period, milk production increased 6% and egg production - by 27%. But we are unhappy with our first grain exchange trading.       

Vladimir Putin: You mean the forage trades?

Nikolai Merkushkin: Yes.

Vladimir Putin: At the grain exchange, you mean. Why?

Nikolai Merkushkin: It was our turn to buy yesterday and the day before yesterday, and we had to buy at almost 8, at 7.90.

Vladimir Putin: Seven thousand?

Nikolai Merkushkin: 7,900 roubles per ton. It’s too expensive. We can’t maintain our current prices if we buy forage at prices higher than 6,000 roubles or 6,500 roubles per ton. 

Vladimir Putin: It is a rather difficult process for you, isn’t it? Do you think they are artificially inflating the price?

Nikolai Merkushkin: It’s quite possible. There is a big shortage and a great number of bidders willing to buy. And they bid quite aggressively. Plus, the exchange is open today. The Federal Anti-Monopoly Service allowed everyone to participate, including bidders from other regions. We have been involved in open trading before, with bidders from the Samara region, Saratov region, and Tatarstan participating. That is why the price went up to 7,900 roubles, whereas we were expecting it to be somewhere between 6,300 roubles and 6,400 roubles, which would be more or less acceptable.     

Vladimir Putin: Was the trade held in your region?

Nikolai Merkushkin: Yes. It was held online from a central location, but regions were given 5 minutes to bid. Whoever submits the highest bid during the last five second, wins. Therefore, we may need to consider the possibility of introducing direct sales for the regions with large amounts of livestock.   

Vladimir Putin: Do you think we should maintain the system of orders through the Governor?

Nikolai Merkushin: It should be a very tightly controlled system to prevent embezzlement.

Vladimir Putin: You know, the difficulty is that some buy at the grain exchange, others through direct orders from the regions and governors, and naturally, questions arise as to why some are given special terms and others are not. But if we decide to keep this system, we should establish absolutely transparent mechanisms for the recipient selection and strict control over where and to whom the grain goes.

Nikolai Merkushkin: Absolutely. Each ton should be accounted for with the price reflected in the final product.

Vladimir Putin: The final product price is determined by the market. What is more important for the consumer is that there is no artificial shortage to inflate the price. Anyway, we will look into this. The Agriculture Ministry is studying the issue currently and we will be consulting with you.