Russia’s Accounts Chamber, the parliamentary body responsible for supervising the country’s finances, has issued a report that national crab quota reforms conducted in 2019 did not achieve any strategic goals.
The auditors examined the transition of 50 percent of the country’s crab quotas to auctions. The auction’s two main objectives – bringing in more money to federal coffers and attracting more market participants – both failed, their report found.
The Russian Federal Agency for Fisheries hoped to bring in new participants to the fishery by removing the historic catch principle on which crab quotas were distributed. But all the quota winners were companies already present in the market.
The auctions, which raised RUB 142 billion (USD 1.8 billion, EUR 1.5 billion), could also have yielded more money, the audit report claims. The initial price for each lot included an investment obligation component for the winner of each quota. This price was too low, the auditors said, thus affecting the price and eventually resulting in less money for the state.
The initial price was also too low when compared with real consumer prices for crab in 2020, the report said. It could have been higher by 6 percent, which would have brought an additional RUB 7.7 billion (USD 90.6 million, EUR 76.3 million) to the Russian budget.
Russian Federal Agency for Fisheries Chair Ilya Shestakov agreed with the chamber’s conclusions, the report said. In his comments, he pointed out that the mechanism for calculating an initial price for a crab quota needs to be revised. However he added that any changes to the formula that’s currently used must be fully justified.
All-Russian Association of Fishing Industry (VARPE) President German Zverev adopted a more critical tone toward the audit’s conclusions. He said the auditors have made the type of mistakes that were highlighted in the work of Paul Milgrom and Robert Wilson on auction theory, for which they won the Nobel Prize in Economic Science in 2020.
Zverev claimed it’s incorrect to compare the price of crab in the water with seafood on a shelf. Additionally, Zverev said it is not right to assume that consumer prices for crab will be optimal for the duration of the quota contracts, which last 15 years. And with crab quota tied to the total allowable catch (TAC), and not given in metric tons, a possible decline in TAC could mean lower quotas for auction winners in the future.
The report will likely have an impact on discussions now taking place within the industry on the possibility of transitioning the award of all crab quotas to auctions.
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