Cabinet Approves Range of Price Hikes

Itar-TassMinisters Nabiullina, Kudrin and Zhukov attending the final Cabinet meeting chaired by Prime Minister Viktor Zubkov.
The Cabinet on Tuesday cleared double-digit price rises for gas, power and railway services for this year and the next three years, ignoring inflation fears and public discontent.

The approval was announced by Deputy Economic Development and Trade Minister Andrei Klepach after a Cabinet meeting on the last full day of President Vladimir Putin's term in office.

It means that state-capped prices in some sectors will rise as high as 40 percent per year.

"After lively and serious debate, the Cabinet approved the concept of changing tariffs for natural monopolies and the prognosis for price growth on liberalized markets," Klepach told reporters.

He said the changes were necessary to allow the country's electricity, gas and transportation systems to raise enough money for their own development and become more competitive.

The move comes a day before the inauguration of President-elect Dmitry Medvedev, who analysts say will inherit an economic time bomb as prices rise. After shattering state forecasts to reach 11.9 percent last year, inflation shows no signs of slowing, and had reached 6.3 percent in the first four months.

Klepach, however, said the problem could still be contained.

"We have put forward a balanced model for changing tariffs, which will allow us to limit the inflationary impact of these methods," he said.

The Economic Development and Trade Ministry says its proposal would push inflation up by 0.5 percent to 1.4 percent per year from 2009 to 2011.

Ministry forecasts say the country will not exceed 10 percent this year, meaning that officials expect less than 4 percent inflation over roughly the next eight months.