P.Tsenguun,
Director of Altan Taria, answers questions on the situation in the flour market
in the backdrop of popular opinion blaming domestic flour producers for the recent
price rise.

Why has your company
raised the price of flour by MNT10 per kilo? And why does the Clean Competition
Agency say local producers hatched a plot?

The
agency blamed us without reason, hurting our reputation. This false accusation was
meant to lead consumers to expect a fall in prices. We then decided to increase
the price by a minimal amount to give a signal to citizens and to prepare them
for an inevitable rise in prices in the future. The reality is that there is a
shortage of flour in Mongolia. Unfortunately, the Government does not accept the
fact and, instead, spreads disinformation.

Are you referring to the
repeated assertion by the Ministry for Food and Agriculture that there is
enough stock?

They
say there is 100,000 tons of wheat. Maybe, but all of it is not in Ulaanbaatar.
Bringing it here and distributing it to factories will take time. We have no
wheat to grind into flour, so there is no way flour prices will fall. The
Government is deliberately misleading people.

The ministry has also said
flour producers will be given cheap wheat.

Maybe,
but bringing the wheat will take time, cost money and will take a lot of arrangement.
Government work is slow and bureaucratic and it will not change into military
speed in the present case. They have fixed the price at MNT480 per kilo but one
person will be allowed to buy only one kilo. This is no solution to the present
shortage in Ulaanbaatar markets. They want to go back to the socialist era and
are announcing unrealistic decisions.

Do the companies have to
bear the costs of transporting wheat here?

Of
course.

Will flour companies be fined
because they raised the price simultaneously on August 2?

We
did not plot anything. It was clear in July already that prices will rise. Tax
dues for July 1 to April 1 next year will be more, Russia’s wheat price rose
and the companies we import from started indicating that they will stop supplies,
even after raising prices by 20-30 percent. We did not wish to go for a sudden
big increase and approached the Ministry many times to buy the wheat in stock. But
the government employees were not interested in bringing the wheat to
Ulaanbaatar. Most people were on vacation, and our pleas were rejected on
various grounds. We succeeded in getting only some 2,000 or 3,000 tons of wheat
after repeated requests. We gave up and decided to dip into whatever small
reserves we had. We raised the price on August 9. Now we have to wait for the harvest
after using up our reserves.

Maybe the plot is seen
in all companies raising the price at the same time.

Do
the authorities have any evidence that there was a plot, or that we took a
concerted decision? My decision to raise prices was taken on August 2. I don’t
know when the other companies made their decision. Why should I be blamed if other
companies follow us and raise prices?  We
have explained the whole thing but the agency for clean competition wants to
convince consumers that there was a plot when, in fact, there was none and no
law was violated.

I
would say the Ministry itself violated the law prohibiting setting prices by negotiation.
This applies to both raising and reducing prices. So how could the Ministry call
flour producers for a meeting on August 10, and ask them to sell flour at MNT
480 per kg?

Three other big
companies agreed, but not you. Why?

Our
stand was that signing the agreement would be taken to mean that we really
plotted. We will address the court if the agency does not cancel this agreement
as a clear violation of the law.

The Ministry was just
trying to keep prices from rising?

Whatever
the motive, the action has to be legal. The law does not allow any “plotting” to justify price regulation.

Nowhere can one buy flour
MNT480 a kilo.

I
cannot say anything about this as I am not a signatory to the illegal agreement
that settled on that price. Let me repeat the reasons why we raised prices. Our
stock of imported Russian flour is almost finished. We don’t have any Mongolian
wheat in reserve. Our factory in Ulaanbaatar is almost closed. The one in
Selenge is working. Supply of flour will resume only when the wheat is
harvested and when supply is low, we have to increase prices. The Ministry is trying
to set the price of wheat following the harvest. Wheat prices are rising sharply
in the global market. Why should our producers sell wheat at such low prices?

The government bought wheat
from farmers for MNT390,000 per ton last year…

…
and now wants to sell it for MNT220,000. Is this how taxpayers’ money should be
wasted? Policy makers should leave the prices to be determined by free marker
forces. Look at what’s happening in the global market and in Russia. Our
domestic cultivators stand to make some money and why should they be denied the
opportunity? They have every right to earn money.

The ministry says there
is enough wheat in reserve to meet three months’ demand.

They
say Mongolia consumes 240,000 tons of flour a month which comes from 320,000
tons of wheat. The total wheat in reserve may be three times this, but not all
of it is suitable to be made into flour. Also, every month about 50,000 tons of
wheat is needed to manufacture alcohol, another 40,000-50,000 tons  for animal feed, and some 50,000 tons more are
kept as seeds. Adding all these, Mongolian wheat consumption is 500,000 tons a
month. How much have the authorities stocked to meet all this demand? If the Government
had enough why did we import 76,000 tons of flour last year? One imports only
when there is internal shortage. Last year, the officials boasted that 400,000
tons of wheat was harvested. This is 100,000 tons more than the actual figure.
Why should a government supply false figures to the people?

How do the figures
finally tally?

They
don’t. It is all a lie. When we ask where the wheat is, they say it is reserved
in storages. When we propose to go there and buy wheat, they become silent. The
governors of soums and provinces exaggerate harvest figures to show how efficient
they had been.

How will Mongolia meet
its domestic needs if Russia does not allow export?

The
country has about 50,000 tons of wheat of a quality that can be made into
flour. The estimated harvest figure of 350,000 tons is a gross exaggeration. Our
own surveys put the figure at 250,000 tons. Of this 150,000 tons at most can be
used to make flour. Mongolia will have to import 150,000 tons of good wheat or 100,000
tons of flour before October.  

Why does the ministry hide
facts?

There
is a lot at stake. You exaggerate the harvest to show that higher amounts are
bought with State money. There are many “calculations” in the whole process. Altan
Taria wants people to know that the market is not easy and they must be
prepared for the situation to get much worse.