Russia seeks monopoly price caps to trim inflation

ChrisD(RJ) chrisd at russiajournal.com
Thu Jun 13 06:40:52 PDT 2002


Russia seeks monopoly price caps to trim inflation

MOSCOW, June 13 (Reuters) - Russia should keep a tight grip on price hikes by natural monopolies so than it can nearly halve inflation by 2005, the Economic Development and Trade Ministry said on Thursday.

The government has largely blamed last year's 18.6 percent inflation rate on rate hikes by the gas and power utilities and the transport sector which complain about subsidising the rest of the economy through low domestic prices.

Russia is shaping its 2003 draft budget which assumes that consumer price rises should ease to 10-12 percent next year from a forecast 12-14 percent this year.

Inflation should continue falling by another two percentage points in 2004 and reach 6-8 percent in 2005.

"To secure such dynamics of inflation, the rise of prices and products of natural monopolies should not lead to a consumer price rise of more than three to four percentage points a year," the ministry, charged with the country's economic growth, said in a statement.

Russia is working on an overhaul to its power and gas industries, which completely dominate the economy. But the domestic price rise, seen as inevitable for the industries' cost efficiency, makes the issue politically sensitive.

Russian President Vladimir Putin had told powerful natural monopolies to put their houses in order instead of heaping price rises on the country's hard-pressed consumers.

"Taking into consideration the macroeconomic restrictions in 2003-2005, the price rise on gas of no more that 25 percent per year would be appropriate," the statement said.

The annual price rise on electricity should be capped at 15-18 percent, and railway price increases should match inflation rates, it added.



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