Transcript of the beginning of the meeting:

Vladimir Putin: Mr Kuzmitsky, yesterday you and I and other government officials attended to the problems of the fishing industry, one of the key industries in the region. Yesterday and today we looked at how work is organised in specially protected natural areas.

Today I'd like to focus on the main problems in the economy and social services, the problems that concern the people who live here, on Kamchatka.

I'd like to go back to the beginning of the year. Why did utility prices soar by 35% and in such a short period of time? How did it come about that the federal government had to intervene to return the situation to normal? What are you, the local authorities, planning for 2011? And a related question, what progress has been made on preparations for the autumn and winter period?

Alexei Kuzmitsky: Yes, Mr Prime Minister, prices leapt early this year. That was because municipal authorities had the right to set price limits at their discretion. The regional government, for its part, set the ceiling for the increase in prices of utility services provided to the public. Later, municipal authorities raised the ceiling rates unilaterally, and prices exceeded the set limit. This information became known to the federal government.

We responded to that problem immediately, bringing the aggregate increase in utility prices to 25%. I said that we won't allow that situation to repeat itself, and we will allot funds from the regional budget to make up for the shortfall in revenues. But this will be done after we review the performance of managing companies and compile preliminary results for 2010. In essence, prices were raised for managing companies supervised by municipal leaders.

Vladimir Putin: So each municipal leader is in charge of one managing company, correct?

Alexei Kuzmitsky: As a matter of fact, the main managing company of Petropavlovsk-Kamchatsky services 95% of the housing stock. It reports to the city mayor. Its work and utility bill payment procedures cannot be called transparent. The process of transferring these funds to heat and water suppliers is not transparent either. We're dealing with this problem, and meticulously. Inspectors have the right to request information from cash processing centres on how much money was collected, for what services, and how this money was used.

Vladimir Putin: Mr Kuzmitsky, clearly the situation needs to be resolved. I hope you'll sort it out. But you should do it carefully so as not to affect the interests of ordinary people.

Alexei Kuzmitsky: Mr Prime Minister, we've managed to keep the price increase under 25%, as the federal government demanded. We'll do our best to handle the situation. Should prices rise, we'll use funds from the regional budget to offset the negative effect of such an increase, but we'll oversee the distribution of funds more rigorously this time. I've already instructed the Federal Tariff Service to check how heat and electricity suppliers set prices. I'm sure we can dig around and find savings here.

Vladimir Putin: Obviously, these decisions should be timely and the intervention should not be excessive. As you've just said, these measures should be justified in view of the situation at companies and the state of the utility network. Please keep this in mind. These issues are under the jurisdiction of municipal authorities, but I'm asking you, the governor, to keep an eye on them in 2011, too.

Alexei Kuzmitsky: I will, Mr Prime Minister.

As far as the preparations for the autumn and winter period of 2010-2011, boiler houses, and heating networks, the situation is more or less stable here.

In accordance with the plan, we're preparing housing infrastructure, but we're lagging behind somewhat. The preparations were intended to cover 900,000 square metres of housing. We're keeping our finger on the pulse; this issue is under my personal supervision, and I'll demand that municipal leaders meet their commitments in preparing the housing stock for the heating season. They have the preparation plan and have received the necessary funds. Municipal authorities must fulfil the obligations as set forth in Law 131. I'll put this issue under my personal supervision.

Regarding boiler units, transformer stations and diesel generating units, we're on schedule, 70% is ready so far. The third boiler unit at Kamchatka Thermal Power Station 2 has been converted to run on gas and is now being prepared for launch. In two weeks, the next boiler unit - there are three of them in total - will be converted. The reserve unit will have been converted by October 1. The work of these facilities will be trouble-free I'm sure - two units will start running on gas in the autumn and winter of 2010 and 2011.

We received substantial support from the Housing and Utilities Reform Fund this year, 480 million roubles.

Vladimir Putin: Through the programme to resettle people living in dilapidated housing?

Alexei Kuzmitsky: No, this is for major repairs, Mr Prime Minister.

Vladimir Putin: In fact, you can decide what to use this money for, major repairs or resettlement. Maybe resettlement...

Alexei Kuzmitsky: It's not that easy. We were instructed to use this money to build new housing, and at the price of 30,000 per square metre. But we cannot meet this price under the current federal and local requirements for unit rates.

Vladimir Putin: Mr Kuzmitsky, we can make an exception for you. It's true that housing construction is very costly in your region. But we could make an exception for Kamchatka and increase the ceiling price of a square metre of housing. If you believe that this money should be used for housing construction and resettlement, please submit your proposal and we'll meet you halfway.

Alexei Kuzmitsky: Thank you, Mr Prime Minister, that would be great. We could submit design documentation and detail what the money will go toward and how the price of housing will be set. In accordance with the new requirements, which took effect on January 1, the summary cost estimate documentation was reviewed by a state commission.

This would give a boost to our programme to replace dilapidated housing with new housing in rural areas. We'd use this money for these purposes first of all. I'll submit a proposal in writing.

Vladimir Putin: Please do. Last year you received a relatively small amount for repairs and resettlement, and this year we've allotted almost half a billion roubles for this purpose as well as to make towns and villages more earthquake-resistant. These are quite large sums. That brings me to my next question, what's being done to improve earthquake protection?

Alexei Kuzmitsky: Mr Prime Minister, tomorrow I'll make a detailed report on the progress and plans when we are on-site. I'd only like to note now that we received substantial funds under the presidential directive.

Today, we have 3.5 billion roubles unspent in the budget. The point is the requirements for securing approval by the state commission of summary estimate documentation just changed. Of course, the design and estimate documentation for the construction of a new neighbourhood and earthquake-proofing homes required a considerable amount of time. And all of this happened more or less at the same time. But we were able to achieve full-scale operation.

Incidentally, I want to point out that earthquake-proofing is already in progress in two of the 50 planned buildings. This program focuses on three things: the construction of new homes to replace dilapidated housing that cannot be earthquake-proofed - we have allocated 1.85 billion roubles for this purpose; earthquake-proofing existing buildings - out of the amount I mentioned, 3.5 billion roubles - 1 billion 658 million roubles is allocated for this purpose; funds are also allocated for public facilities - 300,000 roubles for three schools and six kindergartens.

We started earthquake-proofing in two buildings and laid the foundation for a new neighbourhood consisting of 4 buildings with a total of 6,000 square metres. It is scheduled to be finished in October. We will have about 300 million roubles for this new construction. To date, the third bidding round is yet to be held for 48 buildings. I think it's better that the money remains in the budget where no one will steal it and contractors that are unable to handle such large sums will not get them.

And all the documentation to build the new neighbourhood is ready; in fact, it was ready a month ago. Problems arose regarding enforcement of Law 94. Tomorrow I will submit a separate report on this when we are on-site. 

Alexei Kuzmitsky: No, Mr Putin. We need this money...

Vladimir Putin: But if anything were to happen, I'd have to do this. We'll have to take the money away and give it to organisations that will actually start the work. I think you've spent no more than 170 million roubles of the billions you've received.

Alexei Kuzmitsky: No, about 300 million roubles have already been spent to date. We have stepped up work on this project. We now need to decide on a contractor - a major, serious contractor who has the capacity and who can be trusted with such large amounts.

Vladimir Putin: Alright. Let's talk about it in detail tomorrow.

Alexei Kuzmitsky: Very well.

Vladimir Putin: Agreed.

The next group of issues has to do exclusively with the social sphere. These are questions of health, education and preparing schools for September 1.

Alexei Kuzmitsky: Mr Putin, we have allocated about 60 million roubles this year from the regional budget to prepare schools for September 1. This is a serious amount, and it doesn't come from the municipal budgets. We purposefully chose to do so because last year we had some gaps in our work to prepare schools for September 1. I attended the meeting you held on this issue. This year, the situation is quite stable: we have 120 schools to date, 114 are ready, and all schools will be ready by the beginning of the school year on September 1. The Education Ministry of the Kamchatka Territory is supervising the work.

I wanted to say that there are some positive developments in the construction of social infrastructure. I wanted to show you - we built a tuberculosis dispensary in Palan.

Vladimir Putin: In Koryakia?

Alexei Kuzmitsky: Yes, it is in the Koryak Autonomous Area. A 60-bed tuberculosis hospital, but there is room for growth. In our Koryak Autonomous Area, tuberculosis is really a scourge of the indigenous peoples.

Modern equipment, comfortable wards and kitchens. Work is in progress.

Vladimir Putin: Everything modern?

Alexei Kuzmitsky: Yes, modern. Modern diagnostic equipment is good support in general for both the treatment and prevention of tuberculosis, meaning the general campaign against tuberculosis in the province. We did not have enough beds. We will now be able to provide more comfortable accommodations for patients.

Mr Putin, another facility we can be proud of is our sports complex. It measures more than 6,000 square metres and there is room for futsal, wrestling, boxing, aerobics, and there is also a gym. There were no such sports facilities in Petropavlovsk-Kamchatsky before, which has a population of 195,000. This year, we plan to lay the foundations for a sports complex with a swimming pool in the city of Yelizovo. Next year, we plan to build - with funds incorporated in the long term - an open ice palace here in Petropavlovsk-Kamchatsky.

Our policy is to make our people healthy and get them involved in sport, especially young people, to get them off the streets, which helps prevent addiction, which, of course, as in any other region, develops in youth. Therefore, through the sports infrastructure, a policy promoting healthy lifestyles, and here through the multiplier effect ... I will mention it in a certain way, I'll detail the development of things related to sports separately - multiplier effects will be applied to the development of tourism in the Kamchatka region, development of winter sports, which are very popular here today. Another infrastructure project is...

Vladimir Putin: Is the biathlon complex operating?

Alexei Kuzmitsky: Yes, twice in 2010, we already held major competitions with 75 athletes, 18 countries and all the biathlon stars of the world. The president of the International Biathlon Union was in attendance. Athletes and experts immediately noted that this complex is able to hold high-level international competitions. Tomorrow I'll show you this complex. And we are planning to win the right to host the World Junior Championships in the Kamchatka Territory. And really, we have good chances. We have already positioned our region quite well and rebranded ourselves at the forum Russia - A Sports Power. We presented models.

On Mount Moroznaya, we are planning to put artificial snow this year on one of the ski slopes, where skiers are trained from the age of three. We need artificial snow on the trails, because there is a problem for our skiers - they ski on natural snow, and then they go to competitions with artificial snow, which involves completely different speeds.

Vladimir Putin: Mr Kuzmitsky, I still want to come back to the subject of schools. Schools will all be ready and the necessary repairs completed by September 1?

Alexei Kuzmitsky: They will all be ready, Mr Putin. This is under my personal supervision, because last year we had a certain failure. All schools will be ready this year.

Vladimir Putin: Good. And there's another issue, which, as I understand, is sensitive for the people who live here. According to local press, literally the last few weeks, prices are rising for some grades of petrol. What's happening? They've written that there was a sharp increase....

Alexei Kuzmitsky: Mr Putin, based on my data, on my report for August 16, there was no sharp increase in retail prices for petrol at petrol stations there. The price increases ranged from 1.6% to 1.9%. In any case, I will personally supervise this and drive out to the petrol stations and have a look. And I would like to have a directive from you on this. Since our companies fall under antitrust law, please instruct the Federal Antimonopoly Service to check how prices are formed and why that happened. For our part, we will also conduct an inspection on this. I will personally drive out there and observe how objectively the media is providing information about this alleged sharp rise in petrol prices.

Vladimir Putin: I checked it. On August 12, in the wholesale segment - you have two major wholesale distributors - there was a definite increase in the prices for certain types of petrol. We need to verify whether this increase is justified. If it is determined that this increase is unreasonable, then you need to return prices to their pre-August 12 level. I will certainly issue the corresponding directive to the Federal Antimonopoly Service. And I ask you, Mr Kuzmitsky, as you yourself suggested, to go out there personally and have a look.

Alexei Kuzmitsky: Alright.