Yeah you can't combine a market mechanism while telling a production (quasi-)monopolist that they need to fix prices.

Reminds me of the good ole GDR: They would subsidise bread so that people could always afford it, a completely laudable goal. People also had chickens in their backyard because eggs and meat and when it came to feeding those chickens, they had a look at the prices -- and, yeah, the state subsidised bread. Not grain. So they fed the chickens bread as it was cheaper. It's an easy enough fix, just shift the subsidies but nope, governmental inertia or something prevented them from doing it.