Russia Proposes Limiting Annual Energy Tariff Hike To Boost Growth

By Andrey Ostroukh

MOSCOW--Russia's economy ministry said Monday it proposes to limit annual energy price increases for businesses starting from next year and to channel 200 billion rubles ($6.4 billion) to 400 billion rubles a year into infrastructure projects from the reserve fund to boost economic growth.

Economy Minister Andrei Belousov told reporters that the ministry proposes cutting an annual hike in gas tariffs for industrial users to around 5% from 15% and to lower grid company tariffs.

"Today it is very important to break the trend of [economic] growth slowdown. It is very important to send a positive signal to business [to show] that we are really working on supporting of economic growth," Mr. Belousov said.

"[The] slowdown in tariffs' growth is a part of such a signal," he said, adding that a full freeze in tariff growth looks "unrealistic" and the ministry will be ready to present the proposals by May 6.

This year's planned tariff hikes can't be revised as they have already been factored into the budget and companies' investment projects, Mr. Belousov said.

He added that the country's gas monopoly OAO Gazprom (GAZP.RS) has reserves to bear lower tariff hikes, and domestic prices for gas would fall if the market is liberalized due to currently strong supply.

Mr. Belousov also said that the ministry doesn't see room to limit fare rises for the country's railway monopoly RZhD.

The central bank has been long blaming annual utility tariff hikes for fuelling consumer inflation as the bank strives to tame annual price growth, bringing it into the range of between 5% and 6% from 7% seen in March.

Lower inflation will allow the central bank to trim lending rates, which in turn should result in cheaper loans for corporate and retail clients of Russian banks.

Commenting on his earlier proposal to finance infrastructure projects through the national welfare fund, he said that the key point is that interest rates of such loans should be at inflation levels of 5% to 6%.

"I think that we can speak about 200-400 billion rubles a year. It is the amount which the infrustructure sector can digest. But much depends of interest rates," Mr. Belousov said.

When asked about privatization and particularly state-controlled telecoms company Rostelecom (RTKM.RS), he said that a sale of the state stake is possible but won't happen before September.

On Friday the country's first deputy prime minister, Igor Shuvalov, said that the government may sell its entire stake in state-controlled Rostelecom in 2013 for a minimum of $5 billion.

Olga Razumovskaya in Moscow contributed to this article.

Write to Andrey Ostroukh at [e-mail]