Izvestiya: "Annual utility rate increases can wait until July"
Vladimir Putin held a meeting to outline the budget process. Before submitting a draft budget for the next three years, the prime minister announced some key changes to the country's core financial document. From 2012 on, utility rates will only be raised during the traditionally off-peak heating season in early July rather than during its peak in January.
"The rates are usually raised every January 1, which creates inflationary expectations and we actually trigger inflation at the beginning of the year," the prime minister explained.
The changes will concern gas rates (up to 15% increase) and electricity (within the rate of inflation).
"Higher rates in July will have fewer consequences than in January," Putin said.
Rate increase schedules will remain the same for Russian Railways who will impose its usual price adjustments on January 1. However, there will be a new 6% limit on the rate increase; so, Russian Railways will gain an extra 40 billion roubles from the federal budget to spend on renovation and security.
Now that the rules have changed for the first time in years, companies will have to review their plans for next year. Public officials will have to prepare for it as well. The prime minister instructed the Ministrey of Finance to discuss the matter with the regional governors and help them prepare for the unexpected changes. He also requested that utility company managers be advised in order to revise their investment plans.
"Please note that we can provide up to 50 billion roubles in government guarantees to maintain investment project plans," Vladimir Putin said. "The companies can use the guarantees to meet their objectives."
When asked whether the decision was linked with the upcoming elections, First Deputy Prime Minister Igor Shuvalov and Minister of Economic Development Elvira Nabiullina gave a unanimous reply.
"No, the forthcoming election did not affect this decision in any way," Shuvalov assured.
"We have been suggesting that the rate policy be reviewed, to help reel in inflation, for a long time now; the decision was inevitable," Nabiullina interrupted her colleague.
"It is only a coincidence that the decision was made this year," Shuvalov took back the lead. "It should have happened last year, and we could not postpone it until 2013."
The government will read the final budget on September 20. On October 1, the document will be submitted to the State Duma. Putin instructed the interested ministers to coordinate the work with the State Duma parties as they did with the draft budget. It was also discussed with representatives of the Russian Popular Front.
For the first time since the financial crisis, the 2011 budget will not run a deficit. Putin said the government's revenue would equal expenses, making up 11 trillion roubles, according to the Finance Ministry's recent estimates. Initially, the government estimated a 3% deficit.
The next year's planned profit is 11.8 trillion roubles while expenses are estimated at 12.6 trillion roubles, which creates a 1.5% deficit. Vladimir Putin is still confident that by the end of 2012, the results will be as positive as this year.
Anastasia Novikova
