Reportedly the Russian factory workers are being paid quite well. And the lack of quality is just a myth I think. There’s no indication that’s actually true.
The real reason prices in the West are so high is that there’s a shortage, and shells are supplied overwhelmingly by private contractors, and so the price has multiplied thanks to supply-and-demand market logic.
You may think the Efficient Free Market Knows Best™, so shouldn’t they increase production? Think again. They’re making record profits right now. Meaningfully increasing production involves building new factories for billions of dollars/euros, which might be ready in a year or two. By then the war will be over and they would have overcapacity, which would be inefficient and prices would plummet. Why would they do that to themselves?
So they’re in a great negotiating position vis a vis desperate Western governments. They want guaranteed profits, of the same sort they’re making right now, or else the shortage continues.