At the meeting of the Government Presidium on July 12, 2010 officials focused on addressing the consequences of the drought in Western Russia. In his opening remarks, Prime Minister Vladimir Putin said that the government will provide financial assistance and budget loans to the regions hit by the drought, and he demanded that supplies of fodder to these regions not be limited. He emphasised that the top priority is to prevent livestock numbers from declining.

The Prime Minister has instructed the Federal Service for Insurance Supervision to monitor prompt insurance payouts to farms that had insured their crops and cut short any attempts by insurance companies to make profits out of the distressful situation. In addition, agricultural producers will be eligible for special discounted rates when purchasing fuel and lubricants.

Officials at the Presidium meeting also discussed improving the government's oversight of the economy. The list of businesses for which notification is sufficient to start a new company will be expanded, the Prime Minister said. "We will expand the list of businesses with a simple notification procedure for new companies to include the pharmaceutical industry, healthcare and the manufacture and maintenance of medical equipment," Vladimir Putin said. In addition, the Federal Agency for Fishery was tasked with developing proposals to reduce administrative barriers for commercial fisheries.

Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon,

Let's start by exchanging up-to-the-minute information. Is Mr Andrei Krainy here?

Andrei Krainy: Yes, Mr Putin.

Vladimir Putin: Yesterday I congratulated you on Fisherman's Day, and I said that I'd also call fishermen later to congratulate them in honour of the holiday. I spoke with the head of a fishing company, who brought up several issues pertaining to the fishing industry, including fisheries, inshore fishing, the exclusive economic zone, inspections, regulations and quotas. I'd like to hear your opinion on the issues raised by the fishermen yesterday.

Andrei Krainy: With pleasure, Mr Putin. First of all, Mr Mikhail Galakhin brought up the fact that the law sets forth separate quotas for inshore fishing and for fishing in the exclusive economic zone of the Russian Federation. Some fishing companies operate in the inshore zone, and others in the exclusive economic zone. The former are limited to fishing within the national border, in other words in Russian waters within 12 miles of the coast. It's clear that fish has no clue about our restrictions and migrate without caring much about Russia's administrative borders. Nevertheless, the fishing companies that are authorised to catch fish in the exclusive economic zone cannot cross the border of the 12-mile zone, and vice versa.

Some companies have both types of permits. For example, a company can have a fishing quota of 200 metric tons for the inshore zone and 2,000 metric tons for Russia's exclusive economic zone. As soon as it has caught 200 tons of pollock in the inshore zone, it has to leave the 12-mile zone and wait until the pollock cross the border. This is currently going on in the Bering Sea - fishermen have to move to the exclusive economic zone even though fish may still be in the inshore zone.

In the Soviet Union there was a so-called single fishing space, which fishermen in the Far East have been discussing a great deal. The problem has become quite acute, and can only be resolved through legislative changes, namely changing the laws on fisheries and the national border, and amending Resolution No. 560 on multiple border crossings. Should such a directive be issued, our agency is ready to prepare these amendments in conjunction with the Federal Security Service and the State Border Service.

Vladimir Putin: Please do this. Regional governments should also be involved in this work.

Andrei Krainy: Absolutely.

Vladimir Putin: Because these regulations were introduced to meet the regions halfway: they wanted to regulate fishing in the inshore zone themselves.

We must agree on this issue so that the interests of everybody involved are taken into account.

Andrei Krainy: Mr Putin, we'll hold a conference of the Far Eastern Council on Research in the Fishing Industry on July 27 to discuss these issues. All the regions of the Far East will be attending.

Another issue brought up yesterday concerns allocations for research programmes. In 2008, we ended the so-called research allocations for research institutes under the Federal Agency for Fisheries and agreed that everything would be funded through the federal budget. In 2009, the Ministry of Finance allotted 1.823 billion roubles, and this amount was increased by 1.6 billion roubles following a meeting of the Government Commission on Budget Estimates, which means that total funding amounted to 3.4 billion roubles in 2010, which is clearly not enough.

Vladimir Putin: Mr Galakhin, with whom I spoke yesterday, also said that our efforts are far less effective because researchers just sit in their labs and have no opportunity to work at sea.

Andrei Krainy: Absolutely. Due to a lack of funding for marine research, we only have 220 sea expeditions annually, whereas we should be having 354 such expeditions. Thus, if we got all the funds we requested, we could increase fish yields by about one million tons, which would translate to some 20 billion roubles in additional revenue for all levels of government, from taxes on the use of water resources to higher income taxes. But to find fish, they need to look for them, not just sit around a lab. I absolutely agree with you.

Vladimir Putin: Mr Kudrin, please work this out with the agency and determine how much funding is needed for these oceanic research exhibitions.

Alexei Kudrin: Will do.

Andrei Krainy: We have all the necessary calculations.

The next issue concerns the number of inspections and inspectors. This is a very complicated issue. We're working on it with the Federal Border Service and the Federal Customs Service. We plan to finalise our proposals and submit them to you by the end of this week, if you don't mind. But sometimes, when trying to get rid of administrative barriers, we just make the situation worse. For example, as far as small businesses, we just passed a law that allows us to inspect a company and request statistics from them no more than once every five years. But if we haven't received statistics from a fishing company in two years, we have the right to legally deprive them of fishing quotas. We need to consult with our colleagues to sort out this issue.

Vladimir Putin: Please do. Our measures should not cause any harm to companies.

Andrei Krainy: Absolutely.

Vladimir Putin: On the other hand, we cannot allow anyone to fish in the sea indiscriminately. We should straighten out the situation here.

Andrei Krainy: Absolutely.

Vladimir Putin: This issue should be studied thoroughly. I'll return to it later today. It's one of the issues on today's agenda. This doesn't just pertain to the sea, but rather the government's overall oversight and inspections. We will certainly look into this issue again.

Andrei Krainy: Will do.

And the last issue that was brought up yesterday. Following your instruction, we transferred 12 longline fishing vessels, built against the government's guarantee, to the jurisdiction of the Russian Federation, thus resolving a problem that has been dragging on for 17 years. But the thing is that seven vessels are currently at sea, and the company that owns the remaining five vessels does not have a permit to use them to harvest aquatic biological resources. The solution to this problem is simple: if the Ministry of Finance issues a directive to the Bank for Development and our agency, we'll consider the possibility of selling or leasing the five vessels to other Far Eastern companies with the right to buy them out. Therefore, the federal budget will receive additional revenues, we'll receive new vessels, and crews will get jobs.

Vladimir Putin: Good. But we should not force companies to sell or resell their assets.

Andrei Krainy: Of course not, Mr Putin, but some companies are already eager to buy these vessels. These are new vessels; in fact we have no newer vessels.

Vladimir Putin: Good. Work out it please. Mr Sobyanin, please issue a relevant directive.

Thank you very much.Mr Kudrin, please tell us about the state of the federal budget during the first half of the year.

Alexei Kudrin: Mr Putin, ladies and gentlemen, at the most recent meeting of the government I outlined the preliminary data regarding federal budget support for the regions. Today I will present the comprehensive data on the federal budget for the first half of the year.

Budget revenues totalled 3.995 trillion roubles in these six months, or 51.3% of the amount expected for this year. If taken in proportion to GDP, revenues reached 19.3% of GDP, which is still less than the pre-crisis levels of between 22% and 24%.

We are closely monitoring all sources of federal budget revenues. We recently held a meeting with all government bodies to discuss management of government revenues.

I should add that budget revenues this year have been affected by the abolition of the Unified Social Tax - which no longer goes into the federal budget, thus reducing revenues by 219 billion roubles - and decreased revenues from the Reserve Fund and the National Welfare Fund. Resources were withdrawn from these funds, leading to a 167 billion-rouble decrease in revenue from corresponding investments.

At the same time, some sources of revenue have increased as compared to last year. Revenues from the Bank of Russia profits increased by 139 billion roubles compared to 2009. Advance payments of future customs duties and other obligations increased by 76 billion roubles following the Federal Treasury's taking on the management of these accounts last year.

So, we are keeping records of all government revenues. Nevertheless, we have not yet reached pre-crisis levels of government revenues as a proportion of GDP.

Federal budget spending reached 4.435,3 trillion roubles in the first six months of 2010, which is 43.4% of the total approved budget spending. This is 21.4% of GDP, which is one of the highest levels we have ever had.

And so in terms of revenues and the gap between revenues and expenditures, we are still going through a difficult period, which, of course, results in a deficit.

However, we have revised the deficit projection for the first half of the year: it is now 2.1%. I have previously said 2.3%, but now it is 2.1%. We need some time before a full report is available, of course.

I would like to emphasise that despite the fact that since January 1 we have distributed 99.9% of all our financial allocations to all ministries and agencies - the remaining 0.1%, which is an insignificant amount, is mostly due to delays in enacting corresponding legislation - not all our ministries and budgetary planning bodies have passed the resources on to their subordinate bodies, which means that not all publicly funded entities even know how much they will receive for this year.

Some ministries and agencies have passed on less than 50% of their obligations. These include the Administrative Directorate, the Federal Agency for Press and Mass Media, the Federal Agency for the Development of State Border Infrastructure, the Federal Agency for Science and Innovation, and the Federal Agency for State Reserves.

Some government-supported entities have passed on a little over 50% of the obligations. These are the Russian Academy of Sciences, the Federal Tariff Service and the Federal Space Agency. This is still insufficient. The average for all ministries and agencies is 73.9% of total allocations, which is insufficient for this time of the year.

Naturally, we are continuing our efforts. I have sent another message to all key agencies that have had the greatest delays in distributing their allocations.

The Reserve Fund totalled 1.226 trillion roubles as of July 1. Its value had fallen by 603 billion roubles before the beginning of the year, in part due to spending and in part due to fluctuating exchange rates (the reserves are susceptible to exchange rates because they are kept in foreign currencies). Finally, we will spend more of the Reserve Fund by the end of the year. We hope to have a little over 300 billion roubles by year's end.

The National Welfare Fund stood at 2.666 trillion roubles as of July 1, which is a decrease of 102.6 billion roubles. These funds were in part spent on co-financing voluntary pensions savings programmes. This fund is also susceptible to changes in the exchange rate.

All in all, the budget is being implemented according to plan. We are more or less satisfied with the ministries. Thank you.

Vladimir Putin: Thank you. Are there any comments? No?

Mr Kudrin, yesterday we met with our counterparts from the Kyrgyz government and discussed a possibility of providing additional aid to the Republic of Kyrgyzstan. What are the proposals?

Alexei Kudrin: Mr Putin, together with Kazakhstan and the Eurasian Development Bank we are assessing the current needs the Republic of Kyrgyzstan in light of the difficulties it is now facing, including the unrest in the republic.

Naturally, we will agree to provide the most essential support. We also believe it is possible to send an additional $10 million grant to meet the most important social needs in Kyrgyzstan and stabilise the situation. We can allocate these $10 million from the international activity reserves without amending the federal budget.

Vladimir Putin: Good, let's do this. Mr Sechin, you mentioned the possibility of assisting Kyrgyzstan by supplying fuel and lubricants.

Igor Sechin: Mr Prime Minister, we have looked into this issue in accordance with your instructions. Three Russian companies are ready to supply 20,000 metric tons of diesel fuel in humanitarian aid. You have signed a corresponding government executive order stipulating that this fuel will be exempt from customs duties due to its humanitarian nature. We plan to start delivering this fuel in the second half of July, as soon as you instruct us to do so.

Kyrgyz representatives of the working group are here today. They are negotiating in the Ministry of Energy some issues that have to do with assets and liabilities. We will continue working with them, Mr Putin.

Vladimir Putin: Good. Please do not delay. Start delivering the fuel. Start the job. What about fuel and lubricants for our agricultural sector?

Igor Sechin: Mr Putin, in accordance with your instructions on providing fuel and lubricants for the harvest, we hosted a meeting of all the relevant government bodies and federal executive agencies last week, including the Ministry of Agriculture, the Ministry of Energy, the Federal Antimonopoly Service and the oil companies. We worked out specific solutions whereby oil companies would provide support for agricultural producers.

In 2009 oil companies delivered 1.412 million tons of petroleum products at reduced rates to the agricultural companies. From February to June of this year, they provided 988,000 metric tons of petroleum products. The value of this support has already reached 3.2 billion roubles, as compared to three billion roubles last year.

It was deemed expedient to continue supporting agricultural producers by providing them with a 10% discount off the July 1 average wholesale prices for fuel and lubricants in their respective regions, starting in the beginning of July. These prices approximately correspond to those of December of last year, followed by monthly adjustments. Mr Prime Minister, we ask you to endorse this approach.

Vladimir Putin: Good, let's follow this procedure. Considering the difficult situation in the agricultural sector, this support will certainly help many.

Igor Sechin: Yes, I understand.

Vladimir Putin: And I have asked Mr Zubkov to address issues related to the drought. I want to start the next part of our discussion with this.

Many regions of the Russian Federation and Russian autonomous republics - a total of 14 constituent entities of the Russian Federation - have declared a state of emergency. The abnormally hot summer has inflicted heavy losses on rural areas. We had a cold winter with little snow, and now this drought. Of course, we will not leave agricultural producers to the mercy of this large-scale disaster, and this is indeed a disaster - the situation is very serious.

Today we have specifically invited the leaders of several regions affected by the drought to the Government Presidium in order to jointly develop relief measures with us.

First of all, we need to ensure that agricultural enterprises remain financially solvent, so that they remain intact despite the difficult weather and don't get overwhelmed by debt. So that they can continue their normal operations, meet their financial commitments and service previous loans, or even loans that were extended.

I also think one of our most important goals in the current situation is to maintain the increase in livestock and prevent livestock numbers from falling (there is more to say on this issue later). As I already said, the situation is difficult. But all the same, I want to emphasise that we have serious reserves and endurance. Reserves that we accumulated in previous years will enable us to guarantee the stability of the agricultural sector and fully provide for the country's domestic grain needs.

At this stage, I deem it necessary to implement the following immediate measures.

First, we will, of course, provide financial assistance to affected regions and provide them with government loans.

Naturally, this will not free the regions themselves from responsibility. They will also need to allocate the necessary funds from their budgets to support agricultural enterprises affected by the drought. The leaders of some regions have already started to provide such assistance.

Second, I think that we will be able to allow subsidies to affected agricultural enterprises. However, let me emphasise that these will be directed primarily to those regions that are involved in agricultural products insurance.

Let me remind you that I visited several of these regions, including Orenburg, with the Minister of Agriculture last year. We discussed this very issue; we talked about how important it is to use modern market methods to reduce risks in agriculture. Some of the regional leaders present here today were there at that meeting.

Unfortunately, agriculture has changed little in this sense. Crop insurance is still the exception than the rule. Obviously, neither the ministry nor the regional leaders have worked enough on this issue.

Furthermore. In this situation we intend, of course, to use our grain intervention fund in the most efficient manner possible. We currently have 9.5 million tonnes, 3.5 tonnes of which is feed grain. I think that many of those present remember that it was not cheap, and storage was and remains expensive. Some people have already asked, "Why do we need this at all?" Well, it has proven useful. It could not have come at a better time. First of all, of course, let me draw your attention to feed grain. Our livestock and poultry companies must have the opportunity to purchase feed grain in the necessary amounts and without delay. I therefore ask the Agriculture and Finance Ministries to provide the necessary subsidies for buying feed first and foremost, so that these relief measures will be effective, timely, and so that agricultural enterprises affected by drought will receive genuine relief and will not have to reduce the number of cattle; so that livestock is not slaughtered unnecessarily, in short.

Now, moving on to insurance: we must stop any attempt to capitalise on this disaster, this drought. Let me remind you that the government subsidises at least 50% of insurance premiums. We need to see what effect these funds have. Here today is the head of the Federal Service for Insurance Supervision. Mr Koval, are you here?

Alexander Koval: Yes.

Vladimir Putin: Please take personal control of this situation. I would like you to report to the government on a monthly basis about insurance payments to agricultural producers.

I'm aware that some insurance companies are also facing difficulties. I'm asking the Ministry of Finance to consider, together with the Ministry of Economic Development, just how we should work with these companies. Just as we supported the financial sector and the country's banking sector during the downturn. But let me repeat: this analysis should absolutely objective.

I would also like to address the leadership of the regions where the situation is not as bad: There should be no arbitrary decisions to limit the purchase of grain and fodder. There should be no obstacles to delivering grain and fodder to the regions affected by the drought. Let me remind you that all of Russia is a free trade area, including for agricultural products. There should be no self-proclaimed customs checkpoints set up within Russia, or any other restrictions or barriers.

I have asked the heads of the Saratov and Samara Regions and the Republic of Tatarstan to report today on the latest developments in their regions. But first let's hear from Viktor Zubkov. Mr Zubkov, please.

Viktor Zubkov: Mr Putin, ladies and gentlemen, every year we face some sort of drought that affects agriculture. This year is an unusually harsh one, and we have to cope with dry soil as well as dry air, in addition to dry winds in most areas.

It should be said that of the 15 regions afflicted by drought this year, seven are suffering for a second year in a row. This causes significant problems, which you, Mr Putin, have already mentioned. Today we have pieced together a general picture of all the regions in terms of the scale of crop destruction, feed shortages and the financial solvency of farms. Our main goal is to prevent a decrease in milk and meat production. We must save the livestock and the cultivated lands. This week I met with farmers. Farmers manage their farms differently and differ in how much they have, but they all share the same problem - this brutal drought.

One farmer sowed a thousand hectares of top quality wheat. He took out loans, believing that he would be able to harvest at least 40 centners per hectare, sell it, pay off his loans and carry on with his work. But, unfortunately, he will likely get no more than seven or eight centners per hectare now, and of feed grain instead of high-quality grain.

Another framer has a different problem. He incurred losses of 80 million roubles last year and this year he is likely to lose another 90 million. But these people are determined to preserve the livestock and the fields, even in such harsh conditions. Of course, they expect some support from the federal and regional governments. People are working hard, and I think that targeted financial support for individuals most affected is an imperative. Small-scale private farms should receive the most support.

In this regard, it is necessary - and I think regional leaders will discuss this issue today as well - to provide direct financial support for agricultural producers whose crops have been devastated. This support should be through programmes co-financed by the federal and regional governments. The Ministries of Agriculture and Finance should be asked to work out a method for calculating the necessary allocations and distributing them among those in need.

Second, the government should provide loans from the budget to the Russian regions afflicted by drought, and the procedure for receiving these loans should be made simpler and less time consuming.

The Ministry of Agriculture should develop and approve procedures for the regions affected by the drought to procure grain from the intervention fund.

Loan extensions should be considered only after the damage is assessed completely. This work has only just begun, and final assessments will take about a month. But there should be no delays here, and we should have a complete, objective picture of what is happening in the country's agroindustrial complex within a month.

At present we have only preliminary information, and the regions' requests lack proper assessments and justification. We need to analyse the situation again, in detail. Each region and the country as a whole should develop an account of its stores of grain and fodder, including interregional accounts that take into consideration other regions' reserves of feed stocks and the intervention fund.

These measures should also be developed promptly, without delay. We in the government will consider the stages of government support and the support measures themselves. I think there will be no delays. One again: this should be actively implemented in the regions as well. Once again: I agree with you, Mr Putin, that we must first and foremost ensure that solvency of grain farms and livestock farms by ensuring that farmers are able to pay back loans to banks and Rosagroleasing. We are well aware that Rosagroleasing is fully dependent on the funding it receives from customers' leasing its products. If we compel Rosagroleasing to accept some sort of long-term, extended conditions, the company will not be able supply anything further - neither this nor next year.

That said, government support measures must combine federal and regional efforts. Regional support measures could involve tax breaks and other preferential policies for agricultural producers affected by the drought. Regional governments now have sufficient powers to do this.

In conclusion, I think these measures should provide effective targeted support. We must meet both our current and long-term commitments and prevent the disruption of the fieldwork for the harvest in 2011. And there should be no doubt that we need to sow the entire area necessary for winter crops.

But our major goal for now should be to ensure that livestock is not affected, so they don't start slaughtering cattle in the regions. Federal support measures, regional support measures and everything we adopt here today should provide solutions to all these issues, and we must keep our livestock. Thank you, Mr Putin.

Vladimir Putin: Mr Vladimir Artyakov, from the Samara Region, please.

Vladimir Artyakov: Mr Putin, members of the Presidium, ladies and gentlemen, for the second consecutive year, agricultural producers in the Samara Region are faced with a serious ordeal - a drought. Mr Zubkov has already discussed this: today, unfortunately, an unprecedented drought plagues the region.

A few brief figures. If last year we lost 600,000 hectares of crops and the harvest fell short by 1.5 million tonnes of grain, this year agricultural producers have already lost 700,000 hectares of cultivated land. Around 800 agricultural companies have been affected, which will cause considerable damage not only to the region's economy, but also to specific commodity producers, of course. In several areas in our region anywhere from 30% to 90% of land under cultivation has been affected. This drought is unprecedented!

We have assessed the damage to property - and Mr Zubkov has rightly observed that we still need to collect additional data - and we estimate that losses there have reached around four billion roubles.

We declared a state of emergency in the region on June 25. Things started to go wrong in early May, and since then there has been no rain at all. The situation is extremely serious.

We are watching the situation closely and continually monitoring the areas that are affected by drought. Our goal today is not only to salvage what's left of the harvest but also keep the cattle population up, as we discussed today, including at livestock breeding farms.

What are we doing to accomplish these goals? We are currently harvesting all of the damaged crops and saving them as hay. In other words, we will try to use the roughage to feed cattle, but this, of course, will significantly affect livestock productivity.

We are paying special attention to private and family farms. As has been said, these farms should not be neglected. Accordingly, Mr Putin, we would like to formulate three proposals and we ask you to issue the corresponding directives to the government.

First, compensate 100% of what agricultural producers affected by the drought must pay in interest rates on loans, for 2010 and part of 2011.

Second, provide direct financial compensation to affected farms in the form of subsidies to the constituent entities from the fund to balance the regional budgets. The region should pay 20% and the federal government 80%. We are ready to assume this obligation.

Third, Mr Putin, we are faced with the problem of acute water shortages in the regions - we haven't discussed this today, but I have spoken with my colleagues and they are facing the same situation. Aquifers are being drained. The Volga River runs for 386 kilometres through our region. This river would seem to be flowing at normal capacity, but the tributaries are lower than usual. The small rivers that flow into the Volga are also lower. The water has receded several metres from the typical shoreline. Accordingly, irrigation is not possible; we are also facing a catastrophic shortage of drinking water.

What are we doing? We, of course, are drilling wells to depths where the aquifer is present. But due to the local geology, we have karst strata. If we drill 60 metres or deeper, we reach a saltwater aquifer, which isn't good for anything - livestock or drinking water.

As I already said, small rivers are drying out, as are the lakes. We're literally trucking water in.

What would I propose? Consider funding a programme to provide drinking water to the regions due to the drought, with the possibility of a 30% to 70% funding ratio - 30% from the regional government and 70% from the federal government. The Housing programme is operating in our region, and it has a clause that specifically mentions this. This programme runs from 2002 to 2010 and has other related items, but it has a narrow scope. Here we must also think about rural areas.

In addition, I want to point out, ladies and gentlemen, that the forecasts for 2011 and 2012 are disquieting - droughts are also possible, and then we will lose the water in those regions where the drought is most acute. Here we need either water pipelines or we need to look again at the possibility of providing water from underground sources. This is a separate programme. It is very important today, and it effects living, breathing people. Thank you.

Vladimir Putin: This programme is in operation in your region?

Vladimir Artyakov: Yes, it is in operation, but our ratio is two-thirds from the regional budget and one-third from the federal budget. It is incomplete - it is part of the Housing programme and does not cover rural areas to any appreciable degree.

Vladimir Putin: How much funding have we allocated for this programme this year?

Viktor Basargin: A total of merely 800 million roubles, Mr Putin, even though the problem has spread beyond the Volga Federal District. Our region, the North Caucasus and the Russian Far East, i.e. the Amur River region, have water supply problems - either there is not enough drinking water or if we have a water intake, then we have problems with dumping and contamination near the intake, etc. And so, we need either additional funding or an additional water supply sub-programme within the framework of the Housing programme.

Vladimir Putin: Well, the problems that the regions you mention face are not because of drought; they've been around for a while.

Viktor Basargin: According to our estimates, the Volga Federal District experiences problems with drought almost every year, especially the Samara Region.

Vladimir Putin: Alright, thank you very much. Mr Ipatov from the Saratov Region, if you please.

Pavel Ipatov: Mr Putin, distinguished members of the government, the Saratov Region is experiencing a drought for the second year in a row. This drought is more intense, unfortunately, because there has been low rainfall for part of April, May and June. A waterless period.  Starting with late May, we realised that there would be problems and implemented certain measures, primarily those linked with completely fulfilling regional-budget commitments. We provide sizeable support to the milk and livestock breeding sector. All priority payments were made.

We also did the following: we started modifying the crop structure. First, we prioritised winter crops because Saratov wheat is more drought-resistant. We have expanded the area under winter crops by 20%. Second, we sow less spring-time grain crops in order to increase the area under leguminous plants, soy and sunflower. I think this measure has also minimised the consequences of the drought.

The harvesting season has now been underway for two weeks. We are currently gathering 40% of planned winter-crop harvests. And we can see that almost no spring-time crops will be harvested. I repeat, this crop structure prioritizing winter crops yields certain results. Today, we have submitted our statistics to the Ministry of Agriculture. Mr Zubkov has already mentioned this. We are carrying out preliminary assessments of our losses, and it will take some more time before we have the detail on them.

I would like to mention another problem related to the livestock-breeding sector, not plant growing. Indeed, substantial support has been recently provided under the National Priority Project Agriculture. I believe that the Ministry of Agriculture, supported by the Government, helped a great deal with milk and meat last year. We currently subsidise milk production at four roubles per litre. We produce a million litres and are seeing 5% annual growth. Naturally, we consider it important to maintain such rates. However, our daily output has started dwindling by 100 grammes. We have felt the drought's influence on milk-cattle productivity for the first time in the past four years. Although we are not yet seeing the mass slaughter of cattle, private farmers producing impressive milk amounts in some areas, including those bordering on Kazakhstan, just like modern, mechanized, commercial farms, are already feeling somewhat pessimistic. What should be done about this?

As for the Agroleasing company, in the past two years, we have expanded farm machinery purchases by 50%, prioritising national producers. Despite the crisis, we bought 50% more in 2009 and 2010. Of course, those who did so are facing a rather difficult situation. In my opinion, leasing payments should be extended, no matter what. But as this is also detrimental to Agroleasing, this problem requires a comprehensive solution. Direct support should probably not be overlooked either. We have discussed this today with the other governors and with Mr Zubkov.

We had 120 million roubles of leasing payments last year. Such payments exceeded 400 million roubles in 2010. We are ready to recompense direct leasing payments from the regional budget because interest is paid after the contracts are signed, and leasing payments are made in the form of annual installments.

As an exception, it would be appropriate to support affected constituent entities and reimburse them. Federal-budget allocations would account for 60% of such compensation, with regional-budget funding and taxpayers' money making up 20% each. It would be appropriate to support those who purchased large batches of farming machinery, who prioritised domestic producers, and who facilitated rising domestic demand under anti-crisis programmes. This is one proposal regarding the Agroleasing company.

The fuel issue should also be mentioned. I believe that the Government's decision to cut today's diesel-fuel commercial prices by 10% and the decision made in the first six months of 2010 to provide a 10% discount on December 30, 2009 prices facilitate cost-effective support for producers. But in the past six months of 2010, prices have increased by 8-10%, on average. I therefore think that it would be appropriate to charge easy-term diesel-fuel prices starting from December 30, rather than June 30. There is a 10% gap there. It turns out that our suppliers raise fuel prices in the run-up to the harvesting season. This is probably motivated by market conditions. They then provide discounts on fuel delivered. The situation is repeated each year. In my opinion, to provide real support to farmers, December 30 diesel-fuel prices should be taken as a benchmark, so that the prices then remain stable all year round.

Now, finally, to the issue of insurance. Of course, harvests should be insured. We attended a number of meetings last year, where it was, I think correctly, noted that agricultural producers and local governments do not pay enough attention to insurance matters. We felt the crunch last year. This year, we have drawn certain conclusions and have increased the volume of insured harvests by 25%. In 2009 and 2010, we ran after insurance companies, although compensation paid virtually equals insurance premiums. In effect, agricultural producers are not confident that they will receive any money at all during droughts.

I think this, of course, depends on the market situation, and it is hard to offer any advice here. But I believe that Rosselkhozbank (Russian Agricultural Bank) is working wonderfully, charging 12% interest on loans. This is a cause for some rejoicing. In my opinion, a well-controlled company affiliated with Rosselkhozbank could distribute insurance policies. That would mean there would be no need to contact two different companies. About 30 new offices have opened in the region. Rosselkhozbank operates in every district. Any insurance company affiliated with Rosselkhozbank could open its office on these premises. This concept would be complete, clear and transparent. I am confident that, instead of being persuaded to buy insurance policies, agricultural producers would see clear and transparent process. Those are some of my proposals. Thank you.

Vladimir Putin: Speaking of diesel-fuel prices, a tonne of fuel cost 17,900 roubles on December 31, 2009. Fuel prices reached 18,900 roubles on July 1, 2010.

Pavel Ipatov: Regional fuel prices totaled 17,000 roubles, subsequently dropping to 16,000-plus roubles, and then down to 15,000 and 14,800 roubles. Current fuel prices are about 15,600 roubles with a 10% discount.

Vladimir Putin: This means that fuel prices are less than the already quite low levels of December 31, 2009.

Pavel Ipatov: Current fuel prices for the Saratov Region should total 14,700 roubles, making them 10% less than December 31 levels. Given current discounts, fuel prices stand at 15,600 roubles. Given fuel-price discounts, these prices are 1,100 roubles higher than those under December 31 discounts. This is a substantial price margin.

Vladimir Putin: Current market prices are 18,900 roubles. How much do you receive? What is the actual current price?

Pavel Ipatov: The region gets fuel for 16,700 roubles at a discount. But the current regional price is 17,500 roubles.

Vladimir Putin: So, it is 17,500 roubles today?

Pavel Ipatov: Yes, diesel-fuel price is 17,500 roubles.

Vladimir Putin: So, there is no 10% discount?

Pavel Ipatov: It works out that no, there isn't.

Igor Sechin: In fact there is indeed a discount. On the other hand, the region wants to reduce prices even further. Mr Putin, we cannot do this because we live in a free-market economy. Increased consumption is one aspect. We are also asking the regions to consume all their fuel but receive no answer. Companies have to spend more on storing and transporting surplus fuel.

Nevertheless, companies are keeping their promises. In the first six months of 2010, the regions received 3.2 billion rouble discounts for diesel fuel, and the second six-month period has just begun. They will still have an opportunity to take advantage of these discounts.

Formalising 2009 prices once and for all would in the current situation be a decision entirely alien to the market. Consequently, it would imply 15%-plus, rather than 10%, discounts for companies. Mr Putin, this is a very difficult decision.

Vladimir Putin: Good. Nevertheless, please assess the situation in the regions.

Igor Sechin: Yes.

Vladimir Putin: And please report back with your findings to me.

Igor Sechin: Yes, sir. Good.

Vladimir Putin: Agreed. Please go ahead and assess the situation in the regions and report back with your findings to me. Thank you. President Rustam Minnikhanov of Tatarstan has the floor. Please.

Rustam Minnikhanov: Mr Putin. All 43 regions of our republic have been affected by the drought, and here are the figures: we got from 4.5 to 5 million tons of grain a year over the past ten years, but this year we will get about 1 million.

Vladimir Putin: What was last year's figure - 5 million?

Rustam Minnikhanov: Several districts were affected by drought last year and the harvest amounted to about 4.5 million tons, this year we will receive approximately 1 million tons.

Vladimir Putin: You mean a fifth of what you usually get?

Rustam Minnikhanov: Yes, almost 80% less. The situation is in fact very serious. Of course, we have also set up the emergencies headquarters, our Ministry of Agriculture has local agencies in every district. We know about the situation not only in large agricultural enterprises, but also small family farms as well. We held a meeting and invited specialists - we have the drought for the second year running - following which we have drawn some conclusions about the varieties we need to cultivate and the technology we need to use across the entire republic. Maintaining livestock population and productivity is our main goal. 

We are a livestock-raising republic: today we have 1.2 million cattle, more than 700,000 pigs and 13,000 birds. And of course, today we need to help our family-owned farms and personal subsidiary plots where we have some 400,000 large and smaller breeds of cattle. 

How can we do this? We need 3 million tons of coarse succulent fodder. We will certainly be able to procure about half of what we need here, while the other half will be imported.

More than a hundred teams are currently operating outside the republic and the republic's entire population is also involved in procuring the fodder.

We are currently facing an even more complicated issue involving grain - we have a 1 million ton shortfall. And I will definitely appeal to the intervention fund for help, which is something we really need, and it is a relief that we have such a fund. We need to find a way of receiving this grain. That is our first request.

Second, something we have already discussed. We will have to import large amounts of fodder, which is sure to cost a great deal: both private farmers and agricultural conglomerates are adding up the cost. And this is what we need - compensation for fodder, per head of cattle. It will be difficult to maintain the cattle population if we do not procure enough fodder. That is the second issue, one that we need to take into account when speaking about compensating fodder purchasing costs.

And the third factor. The agricultural sector is in a very difficult financial position, but it is time to think about the harvest and the autumn sowing season. Of course, as you have already said, they will not be able to get anything without the banks' support. We certainly need to find a way to achieve this through budget loans, to help the regions severely hit by drought. In general, of course, the work is organised, the situation is difficult but nevertheless, we still have corn, and if it rains, I hope, we will sow a number of crops, which will then provide green fodder for autumn.

Vladimir Putin: Thank you, Rustam. I would like to speak to our other colleagues from the regions. Does anybody want to add something to what has already been said?  No? That is all, thank you. So we need to prepare the corresponding draft resolutions in several fields.

Murtaza Rakhimov: Mr Putin, may I add something?

Vladimir Putin: Mr Rakhimov, I've just started, but out of respect for you, please do go ahead.

Murtaza Rakhimov (President of the Republic of Bashkortostan): It is vital that you make these decisions. Let's say we have 1.7 million heads of cattle. We produce over 2.5 million tons of milk and 500,000 kg of meat. And you were right about supporting livestock-breeding. We need a decision similar to last year's, because we received solid support for milk and meat production. And the decision taken must be followed through or the situation will become extremely difficult. Thank you.

Vladimir Putin: Thank you. Returning to what has been mentioned and picking up on what the President of the Republic of Bashkortostan said in this respect. We will provide several different avenues of support.

First: subsidies to affected regions. We will offer them direct support, following all the necessary assessments. We need to do this quickly by inviting specialists from the Ministry of Agriculture and, where necessary, from the Emergencies Ministry, and set up a commission. You carried out this work last year and the year before last. That is why we need to do everything promptly and efficiently, calculating the amount of subsidies needed and the volume of easy-term loans required. We heard some approximate figures today, but they are subject to revision. We need accurate and clear figures, not approximates.  

Next, as I have already mentioned, is the sale of grain, fodder grain in particular, from the intervention fund, with the corresponding budget subsidies. This process also needs to be calculated carefully. As the representative of Tatarstan has already mentioned, these subsidies must be provided per head of cattle. We need to calculate demand for these subsidies so that sales from the intervention fund do not negatively impact Rosselkhozbank. This bank is an efficient agricultural operational tool, and it must not be adversely affected as these measures are applied.

As for water supply, the Samara Region needs a thorough examination and analysis of the issue. I have already asked for precise information about the operation of discounts for fuels and lubricants in the regions to be submitted to me; we need to consider the actual specific situation in each region rather than have a general picture. I ask to prepare the draft decisions and begin their implementation as soon as possible.

Regarding the drought we have spoken about today. How does the Ministry of Agriculture adjust its forecast for this year's harvest? Have any changes been made to the overall forecast for the country, including the Siberian Region, as well as other regions?

Yelena Skrynnik: Mr Putin, last week I reported back to you that we have lowered our forecast to 85 million tons, and now we need to reassess the situation again.

Vladimir Putin: You mean another decrease?

Yelena Skrynnik: Yes.

Vladimir Putin: But is there enough to meet our country's internal demand?

Yelena Skrynnik: Yes, it is. We have 24 million tons in our reserves, 20% more than last year. Our consumption rate stands at 77 million tons. We will manage. 

Vladimir Putin: So the only question now is the current volume of export potential?

Yelena Skrynnik: Yes. If we do make reductions, they will only be in that sector.

Vladimir Putin:  Good. Thank you.

Now a few words about the next items on the agenda.

I would like to remind you that last December the government approved a special plan for improving the system of state administration. The need for such an overall approach was obvious. Of course, we have dealt with such issues as debureaucratisation, removing administrative barriers to economic activity and reducing corruption risks in previous years, too. But the decisions taken have proved inadequate. This can be seen from the many complaints against our supervisory, auditing and other authorities. Unfortunately, there were even tragic cases when irresponsibility on the part of officials and the neglect of state regulations led to accidents and emergencies and, as a result, to a loss of life.

A report by the Prosecutor-General's Office is highly revealing in this respect. It cites, as glaring facts, violations made by state agencies concerned with supervisory functions. There were fake tests, shell firms set up to milk businesses, and complete chaos regarding fees for state services.

I therefore consider it absolutely right that we have launched a comprehensive review of the state's regulatory and supervisory functions. We have examined, at a series of government meetings, the state of affairs in education, agriculture, healthcare and construction. And we have prepared a raft of concrete proposals and legislative initiatives.

In addition, the State Duma adopted on first reading amendments to the laws On Education and On Veterinarian Services, the Town Building Code, and the law On Technical Inspection of Transport Vehicles. All the amendments are aimed at simplifying administrative procedures and removing barriers to businesses and individuals.

The government is to consider a draft presidential decree on The Unified National Authority for Accreditation, which will improve quality inspection of goods and services by non-governmental expert bodies. The economic principles behind quality inspection must apply in full.

I would also like to mention amendments to a package of agreements on the Customs Union. Starting next year, all import quarantine permits in Russia, Belarus and Kazakhstan will be abolished. Goods will also move more freely inside the country, because fewer clearances will be required.

A similar process will take place in industry, for transport, on fire safety, land relations and environmental management. I would like to ask the managers and members of departments responsible for these sectors not to wait for the government to consider these issues. You should start removing administrative barriers without further directives and reminders.

We also plan to increase the number of businesses that only require notification to be given on their being set up. The new rules will be applied to pharmaceuticals, medicine, and the production and servicing of medical equipment.

Since July 1, 2009, when we removed unnecessary barriers and established a notice-based procedure for starting a business, more than 33,000 businessmen have seized this opportunity to open businesses. This simple and understandable mechanism appealed to people.

In future this notice-based principle must underpin activities where production or service provision carries some sort of potential risk.

Our next objective is to bring order to licensing. Licenses must be open-ended. The fact that licenses have to be renewed every five or six years has practically no effect on service quality.

We examined the situation in healthcare and in education. Why should businessmen have to go through the same ordeal every five years to obtain permission to carry on working when this process does not have any impact on the quality of services?

We should instead refocus our attention on the observance of license requirements. In the near future we are planning to cut the number of licensed activities and to unify the licensing procedure. A draft law on licensing will be examined in a week's time by the government presidium.

We must be equally decisive in cutting the mandatory certification of products on sale. Until recently, as much as 78% of goods and services have been subjected to this procedure. Now the figure is down to 46%. But even this is too high. We must lower the ceiling to 23%. In all other cases the producers themselves will declare whether their goods meet safety requirements. It will naturally be necessary to simplify the procedure for registering such declarations.

By doing so we will increase the producer's responsibility. We will amend the Administrative Code to this end. A draft law to that effect has been submitted to the government.

Fees for state services rendered or to be rendered must be charged in line with the Tax Code or List of Paid Services approved by the government. Demanding money from businesses or individuals in all other cases will be deemed unlawful. This will also be the first time that our legislation has formulated the rights of a recipient of state services.

All these requirements are contained in a draft law On the Basic Principles of Rendering State and Municipal Services. The State Duma adopted it on its third reading.

All in all, 28 federal laws and 42 government resolutions, not to mention bylaws, must be drafted before the end of the year. I ask you to concentrate on this work and not to drag it out.

Please note that the Ministry of Economic Development now has the rights to vet acts drawn up by other ministries for their impact on the business environment. The most should be made of these rights. We should preclude the adoption of any departmental acts likely to create new barriers or additional administrative costs for business activity.

I can add that at the next meeting of the Commission on Regional Development we will analyse how local government bodies control and supervise construction and what conditions have been created in the regions for the development of this key sector of our economy.

Overall, the government will regularly consider issues concerned with the improvement of state administration and improving the quality of services rendered by the state.