May 6, 2008 (LPAC)--The outgoing Russian government of Prime Minister Victor Zubkov announced that prices for natural gas, electricity and railway transport will rise in the range of 40%-100% in the next four years, Deputy Minister of Economic Development and Trade Andrei Klepach told the press. The government wants to put the population on notice about price growth that will be "really noticeable," Klepach said. But, in a world gripped by hyperinflation, the projected price hikes -- stemming from a policy of seeking to operate domestically at price levels closer and closer to "world market prices" -- could well end up being low estimates.
Klepach said the biggest change will come in electricity rates, which "will practically double" by 2011. For the general population, the regulated rates are supposed to rise 14% in 2008, and 25% each year in 2009-11. Business users will see their rates rise by a factor of 2.5, "or even higher," Keplach said, blaming the surge of energy costs: "Higher forecasted fuel prices -- on coal, fuel oil and natural gas -- required considerable corrections of the electricity prices, especially in 2009."
Natural gas prices are not supposed to rise as much, until 2011, when both the population and industrial consumers will face a 40% price rise.
Russian natural monopolies reform aims at the "equal profitability principle," meaning that revenue from domestic sales should match the earnings to be had if the same products were exported (minus shipping and other costs). But, Klepach said, "When the decision on the transfer to this principle was made, the forecasted world energy resource prices were quite different." Economist Stanislav Menshikov, among others, has pointed out that attempting to implement this principle under current world price conditions threatens to simply cancel all of Russia's plans for an "innovation economy" with significant manufacturing growth.
Rail transport rates will rise twice as much in 2009 as originally planned, according to Klepach. "In 2009 their growth will be at least 17.1%, against the earlier planned 9%. In 2010 the growth will account for 9.7% and 10% in 2011, but prices may go even higher, Klepach said, if the cost of investment in new rail facilities is added.
Klepach claimed that inflation "should stay within 10%," but the risk of exceeding this "is big."
