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. Last Updated: 07/27/2016

Monopolies Blamed for Tariff Woes

The government hopes to free prices of natural gas monopoly Gazprom, national power grid UES and the country's railways, Prime Minister Mikhail Kasyanov said Monday.

Prices for services provided by these companies, regarded as natural monopolies, are currently set by the government. These industries effectively subsidize the rest of the economy, and this hampers investment in their crumbling infrastructure.

Kasyanov said that before prices could be freed, the government would raise them after conducting an analysis of the companies' costs.

"It is impossible to raise tariffs without appropriate measures by these corporations," Kasyanov told the Brunswick UBS Warburg investment conference. "It is also unacceptable from a political point of view as it will be done at the expense of consumers and industry."

Russia is facing State Duma elections in December 2003 and a presidential poll four months later.

"I hope we shall be able to make progress [on the price issue] in the autumn after studying budgets of the companies to realize what kind of a price rise they need for next year," Kasyanov said.

"Such regulation will continue in the transitional period."

Economic Development and Trade Minister German Gref said that according to preliminary calculations, price rises for gas next year would not exceed 20 percent, increases for electricity rates would be no more than 14 percent and limited to 13 percent for the rail system.

The government has allowed the monopolies to raise their tariffs twice this year: From March 1, prices for gas and wholesale electricity rose 20 percent. Wholesale electricity rose another 2.4 percent from July and rail freight 6.8 percent.

The firms had been asked to present their budgets by Aug. 1 of this year. "But unfortunately we have yet to receive some documents, which is due to the slow reactions of these structures, which is difficult to overcome," Gref said.