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Prime Minister Vladimir Putin chaired a meeting of the Government Presidium

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Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, colleagues.

Some time ago I asked deputy prime ministers to hold meetings with the regional heads on the drafting of the budget for 2010-2012. They have done this. I would like Mr Kudrin (Deputy Prime Minister Alexei Kudrin, the Minister of Finance) to tell us about the results of that work. What did you discuss, and what positive conclusions have you made at these meetings? What is the most important task now, and what should we focus on when drafting the budget?

Alexei Kudrin: Mr Prime Minister, acting on your instructions, all deputy prime ministers have held meetings in federal districts to discuss proposals on inter-budget relations and their drafting by 2010.

In conclusion, we summed up all proposals at a meeting chaired by First Deputy Prime Minister Igor Shuvalov, and prepared decisions for submission to the Budget Commission.

Here are some of the proposals from the regions that we have approved. First of all, the financial support fund - what we call transfers - is the main mechanism for defining inter-budgetary relations. Subsidies from the financial support fund to some regions have been reviewed in the light of changes in the tax potential owing to the crisis. The territories that used to have bigger revenue are now sustaining bigger losses. Other regions, which used to have less, are now losing less, including with regard to subsidies.

Therefore, according to the changes in subsidies to regions for next year, 43 regions will lose 47 billion roubles of subsidies. After reviewing the method of redistributing these subsidies, we agreed that we should increase the size of subsidies - or transfers, as we call them - by 23 billion roubles. This will create a more fair situation with regard to the distribution of subsidies next year and allow all regions to attain the main goals in the socio-economic sphere with due account of their changed revenues and tax potential.

The second part of discussions was devoted to the introduction of new taxes and to the new possibilities of the regions, and to expanding the regions' powers under some social mandates, including those that were previously co-financed by the federal budget.

Our objective was to balance the new taxes and the new social commitments of the regions. As a result, it was established that some regions' budgets would be misbalanced by some 30 billion roubles. We propose adding 14 billion roubles to these regions in the form of direct subsidies and 16 billion in the form of loans, easy long-term loans, from allocations for balancing the regions when we discuss the distribution of funds this year, at the end of the year. This money should be allocated above all to the donor regions that are still working to restore their economic capability.

These proposals have been coordinated, on the whole, with the regions. This will allow us to balance decisions on the new taxes and the new social commitments of the regions.

In addition, it has been proposed to augment the approved allocations for road building. We have proposed increasing long-term loans to the regions for road building by 15 billion roubles, and also think we should increase relevant allocations written in the Forecast and the Plan, which we submitted to the previous meeting of the Government, from 25 billion to 40 billion roubles.

Consequently, the interest rate on these long-term loans should be equal to one-fourth of the Central Bank's refinance rate.

We also discussed a number of other issues that are not directly connected to financing, but entail changing the methods of distributing allocations from the federal budget. In particular, when distributing the fuel excise tax we should take into account the length of roads, including winter roads in the northern regions. We had to make an additional "inventory" of such roads, consider the time when they can be used within a year, and subsequently increase the share of such regions when distributing the petrol excise tax.

In addition, we believe that the regions' powers should be increased and corresponding changes made in legislation to broaden the regions' rights in guaranteeing the social security of people and implementing social mandates within their competence.

Some provisions and proposals have been rejected. For example, we rejected the proposal to provide budget loans to commercial structures. We don't provide such loans from the federal budget, and we don't think such loans should be provided from regional loans. The regions may provide budget guarantees, sharing risks with banks, which should assess risks and finance private businesses. They may subsidise interest on loans. But we think it would be unwise to provide direct budget loans.

We discussed several other proposals and rejected them during discussions in the federal districts and during the meeting chaired by Mr Shuvalov.

Vladimir Putin: Good. This should be taken into account as we continue working on this issue. Thank you.

Alexei Kudrin: We will submit the proposals to the Budget Commission for approval.

Vladimir Putin: When will it convene?

Alexei Kudrin: The Budget Commission will meet on Monday, September 14, when we expect to approve all budget parameters for 2010 and budget guidelines for the period until 2012.

Vladimir Putin: Good, thank you.

After the tragedy at the Sayno-Shushenskaya Hydroelectric Power Plant, I have asked the Ministry of Telecommunications and Mass Media to guarantee failsafe operation of the communication and state information systems. Mr Shchyogolev, could you please tell us what has been done.

Igor Shchyogolev: We have conducted a meeting with the participation of not only government officials, but also heads of major companies, including communication companies. We have stated that communication experts are doing well in eliminating the consequences of the tragedy.

The main problem is as follows. The existing networks, primarily mobile networks, are not sufficient to cope with peak loads. They are designed for an average overload of 20%-30%. This is what causes most problems for users, primarily for private users. Now we are going to concentrate on eliminating this bottleneck.

Clearly, this is not an easy task. It will be expensive and will take a long time. Therefore, we were trying to find ways of resolving it faster. We think that mobile operators should improve cooperation with each other. They can sign an agreement and switch the loads in an emergency. In this case, there will be no failures in communication and all users could communicate normally.

Furthermore, some companies have acquired mobile basic stations, which could be airlifted by Emergency Ministry (EM) aircraft in order to keep communication at the proper level. They could also perform another task, which we neglected until recently, notably, inform the public on what is going on, and which organisation could help resolve any emerging problems.

In some regions, commercial operators, the local authorities, and EM agencies have pilot zones of notifying the public about different events with short EM messages. We are going to sum up the results of this experiment in the near future, and if they are positive, to apply it in the rest of the country. We are also planning to prepare recommendations for critical infrastructure facilities to organise reserve ways of internal communication. This will enable them to restore disrupted communication in case of emergency in a short span of time, and, ideally, to prevent it from being disrupted altogether.

Vladimir Putin: All right. I would like to discuss some items of today's agenda. Let's discuss the adjustment of the budget for this year.

The submitted amendments are primarily linked with the implementation of the decisions on anti-crisis support of the banking sector, the real economy, and the social sphere.

A total of 150 billion roubles will be allocated for additional capitalisation of banks. Another 142 billion roubles will be spent on the resolution of other urgent problems. Out of this sum, 28 billion roubles will be spent on building and buying housing for servicemen. All in all, 71 billion roubles have been allocated for projects in the nuclear industry and aircraft building.

In addition, 6.3 billion roubles have been appropriated for the conduct of purchasing and trade interventions in the markets of agricultural produce with a view to creating conditions for their work.

These are not only additional expenses but also the funds that could be redistributed without prejudicing the implementation of the programmes for which they had been initially reserved.

Furthermore, I would also like us to discuss the support of people who have lost their jobs. To remind you, the federal budget allocates funds to the regions for payment of unemployment benefits. Today, we must specify the distribution of these funds among specific regions.

On the whole, the situation on the labour market remains stable. Positive trends in industry and other spheres, and resumed production growth, even if minor, have had a positive effect on employment.

In the last four months, the number of unemployed registered at the employment centres has decreased by almost 200,000 people.

Nevertheless, the number of registered unemployed is still high - 2,100,000 people.

Moreover, we must be prepared to deal with a higher demand for the services of employment centres because of seasonal changes in autumn and winter. This takes place practically every year, and we are aware of that.

Therefore, we should not only send the required funds to the regions which need them in good time, but, in general, not to slacken our support for the unemployed. We must continue working with companies to prevent unjustified layoffs. If cuts in personnel are inevitable, we should help people before they are dismissed. We should offer them retraining, and help them take part in public works, or start their own business.

The relevant programmes that were launched in all regions early this year have proved their effectiveness. Their implementation must be continued, and they should be completed both this year and next.

I believe that the heads of the regions spoke about the effectiveness of these programmes at their meetings with deputy prime ministers.

A number of other decisions which we are going to adopt today are also linked with the stabilisation of the labour market.

I am referring to the allocation of 4.9 billion roubles worth of subsidies from the federal budget to four major defence enterprises, which will help them to pay their debts, and keep their production lines and, I hope, their personnel. These enterprises are Uralvagonzavod, the Kalinovsky chemical plant in the Sverdlovsk Region, the Soyuz design and experimental bureau in Kazan, and the Krasnozavodsk chemical plant in the Moscow Region.

It goes without saying that a key condition for receiving federal support is implementation by its recipients of the plans of financial recovery, reduction of losses, and enhanced efficiency.

Today, we will also discuss issues pertaining to children's rights. One of them is a decision to enable the Federal Agency of Technical Regulation to control the quality of children's goods. There should be tough requirements, which would rule out any harm to children's health.

Let's get down to work.