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Toni Schönfelder
A lifetime of innovation

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Toni Schönfelder
A lifetime of innovation

Wednesday, Dec. 19, 2001. Page 1 Cabinet Reins In Big State Spenders By Alla Startseva Staff Writer Natural monopolies Unified Energy Systems, Rosenergoatom and the Railways Ministry have found out the hard way that the government is determined to hold them accountable for their spending. And Gazprom will soon find out if it is next. After being forced for the first time ever to submit their investment plans for the upcoming year for government approval, the Cabinet has flatly rejected the UES, Rosenergoatom and Railways Ministry programs as unrealistic. The rejections for UES and Rosenergoatom, the Nuclear Power Ministry agency that controls the countrys 10 nuclear power plants, came Tuesday. The decisions mean that the two main national providers of electricity and the railroads will for the first time start a new year without any investment strategy. It also means the government is no longer waving through the spending programs of the natural monopolies, which in years past automatically got the cash they requested for investment proposals, no matter how ambitious they might have been. This should cheer investors and observers who have criticized the natural monopolies for ineffective management and, in the Railways Ministrys case, corruption. "The government has never so seriously discussed the spendings of the natural monopolies before," said Yevsei Gurvich, the head of the Economic Expert Group, a think tank connected to the Finance Ministry. "It is a sign that the government has a stronger control over the production prices of natural monopolies. It wants to understand if monopolies really need as much as they ask for." The Cabinet rejected the Railways Ministrys 161 billion ruble ($5.4 billion) plan, which included a project to build a rail link from the mainland to the Far East island Sakhalin, on Nov. 29. The decision dealt a harsh blow to Railways Minister Nikolai Aksyonenko, who came back to work Tuesday from a vacation that began in October when he was charged with abuse of office for misusing 70 million rubles in funds. A decision on the railways plan was put off until the end of January. However, the Cabinets sharp message Tuesday in refusing to approve UESs 36.16 billion ruble investment plan apparently went right past UES head Anatoly Chubais. He told reporters that the Cabinet had given the green light to 24 billion rubles ($800 million) worth of projects, or 80 percent of his plan. But the Cabinet postponed a decision on the UES program until Feb. 15. A major issue in rejecting the plans of UES, Rosenergoatom and the Railways Ministry was a lack of financing resources. All three are state-owned and have an identical main source of revenues -- tariffs. The government decided two weeks ago that tariffs could not be hiked by more than 35 percent next year. That decision did not go in line with the natural monopolies wishes to increase tariffs by up to 66 percent. "The pricing policy that we determined as part of our economic policy must not thrown off course by decisions on specific issues," Prime Minister Mikhail Kasyanov told the Cabinet, Interfax reported. "They all have to fit into one overall economic policy." The discussion about UES was "rather structural, although the program raised many questions among the government," Deputy Economic Development and Trade Minister Andrei Sharonov said, Prime-Tass reported. The Economic Development and Trade Ministry, which had previously been charged with analyzing the UES investment program, said that some of the projects were ill-founded, that it lacked sufficient information about others, and that the program did not sufficiently conform with UES reform plans. A source close to the Economic Development and Trade Ministry said that the ministry had harshly criticized the unclearness of some spending plans. "The program will be significantly cut and the amount of allocated money will be reduced," the source said. Also at the meeting, ministers deferred by two weeks the approval of an investment proposal by the Nuclear Power Ministry for Rosenergoatoms energy-producing plants. The ministry was instructed to review documents on how Rosenergoatom spends its income, to resolve a dispute over its cooperation with UES in the export of electricity and to address several other issues. Nuclear Power Minister Alexander Rumyantsev said he was confident that 90 percent of Rosenergoatoms program would be accepted, Prime-Tass reported. Rumyantsev said that if tariffs are hiked by the maximum 35 percent allowed, Rosenergoatoms total investment program will amount to 23.5 billion rubles ($785 million). In any case, a possible test of the Cabinets muscle could come later this week when it takes up the 2002 investment program of the fourth natural monopoly, gas giant Gazprom. The company is seeking 161 billion rubles ($5.4 billion) for projects to mainly develop its core business -- gas, Gazprom CEO Alexei Miller said last week, Interfax reported. The Cabinet discusses Gazprom on Thursday.

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