Vladimir Putin: Good morning, let us start by looking at the latest information. We've got the results for the budget implementation in the first six months of the year. Mr Kudrin, could you please tell us about it?

Alexei Kudrin: The results of budget implementation in the first six months are in. The revenues amounted to 4,369 billion roubles. That is 35% more than in the same period of last year. Revenues have grown by that percentage. I would stress the growth of revenues in those Russian regions which do not have the benefit of oil revenues. The revenues of Russian regions have increased by 39% compared with the same period last year. Accordingly, federal expenditure has also increased by 40%. We did better in the first six months than last year. Budget expenditure approved by the State Duma through amendments to the budget has amounted to 41%. That is more than last year, so we would like to see all the other ministries strictly fulfil their obligations.

Russian regions have also increased their expenditure by 34% in the first six months compared with the first six months of last year. Extra revenues have enabled the regions to reduce their debts. Only eight regions reported a deficit in the first six months. It may be that they directed part of their extra revenues to repay their debts for previous years. It enables them to steadily meet their commitments regarding wages, namely, to increase wages by 14% as of February 1. They increased the salaries of teachers and doctors in June, bearing in mind the seasonal factor. The size of the wage funds increased by 35%, which is a seasonal factor. Those who have gone on the long summer holiday, especially teachers and doctors, have been paid their holiday money.

Vladimir Putin: Thank you. Ms Golikova, a law has been passed on pensions to servicemen and diplomats. Some decisions have been made on servicemen's pensions. Could you comment on this, please?

Tatyana Golikova: The Federation Council approved the final editions of two laws at the end of last week, on July 11. The first is regarding the procedure of awarding the insurance pension to the wives of servicemen who accompanied their husbands to military garrisons and had no opportunity to work, and the wives of diplomats who were on a tour of duty and also had no opportunity to work.

On your instructions an amendment was introduced in the second reading regarding the insurance part of the pension so that the insurance rate will be counted in during the period of taking care of disabled children, people with Group 1 disability and elderly relatives over the age of 80.

That provision was in the law before, but it was not backed by funding and in fact was not complied with. As of January 1, 2009 these three categories will be provided for by the pension fund through transfers from the federal budget. In addition, pursuant to your instructions issued some time ago, a law has been passed giving servicemen and civil servants the right to the insurance part of the pension and not only the length of service pension, as before, if they pay insurance premiums into the pension system. It is important that the insurance part of the pension will be awarded regardless of the date when the application was filed.

In accordance with your instructions issued a long time ago, these two bills have been reactivated and will be complied with as of January 1, 2009.

Vladimir Putin: Very good. Thank you.

Mr Zubkov, you have been to Murmansk and Tambov dealing with the problems of fisheries. Could you tell us about that, please?

Viktor Zubkov: I had several meetings with representatives of the fisheries industry in Murmansk last week: fish processing, fishermen, and seamen. We had a constructive discussion. We talked about the practical implementation of the Government's decision aimed at improving the technology of fish processing. Above all, it is to do with the simplified procedure of fishing boat processing in ports, that is, compliance with Government Resolution 184 passed three months ago.

On the whole the Resolution is working. While previously it was not uncommon for ships to be idle for two or three days, now they are processed within three hours for the most part. More than 90% of vessels meet that timeframe. But there are still some exceptions. This is because the customs people still inspect every vessel and do not do it selectively in accordance with the notification procedure. I think we will sort this matter out with the customs shortly and have them harmonise their regulations with the Government Resolution.

The issue should also be worked out with the veterinary and sanitary supervision agencies. I think we will work it out because the veterinary agencies that report to the regional administration charge every vessel 140,000 roubles. These are not their proper functions; these are government supervisory functions. In fact, they have no right to do it. We will deal with this matter.

The second issue. As of January 1, 2009 all the catches will be delivered to the Russian territory. That means that the amount of fish delivered to our ports - the number of vessels and the amount of products - will double.

This makes the development of port infrastructure and processing facilities on shore a priority task. The standards in that sector are still very low although the revenue-generating capacity is very high. We intend to make full use of the potential of public-private partnership. On August 17 the Government will for the first time adopt a federal targeted programme for the development of the fishing industry. We will examine it carefully and I believe that we will adopt it.

Another problem of concern to fishermen is the high price of diesel fuel. The price of fuel is more than 30 roubles per litre, which makes it unprofitable to fish for herring, haddock, whiting, and other small fish traditionally popular among low-income strata. Unless we take measures now these products may disappear from the shelves. I don't think we can allow that to happen. It is necessary to take measures to subsidise diesel fuel prices on condition that fishermen will invest money in modernising their ships. Today our fishermen burn 400 litres of fuel per 1 tonne of fish. Modern engines are 2-3 times more fuel-efficient.

As regards subsidising the refinancing rate on loans, we should proceed in the same way as with agriculture. Perhaps it would make sense to introduce a uniform imputed tax on fish. After all, it is a food product. We discussed all these issues at the meeting of the Commission on Fisheries, instructions have been issued and we will keep the fulfilment of these instructions under control.

On Friday I took part in a meeting on the development of the agro-industrial complex in the Central Federal District in Tambov. All the governors, the heads of enterprises and business representatives were present. Agricultural output is increasing. But there are some problems. Most of them are connected with land, growing prices of energy and mineral fertiliser.

Unfortunately, plugging into power grids today accounts for more than 20% of the cost of any project. That undermines investment activities because the money has to be paid at once. I believe we should consider some proposals made by the industry representatives. They will speak about it. I think we will examine all these proposals at the meeting of the Commission on the Agro-Industrial Complex.

At the same time, successful development of the agro-industrial complex in the regions depends on governors. I must say that the regions where financing out of regional budgets reaches 8-10%, for example, the Belgorod and Orel regions, have reported good results. But in the regions where regional budgets allocate 1-2% for agriculture, agricultural producers are vulnerable to changes in the economy.

Alexei Kudrin has reported that regional budgets have grown dramatically last year, faster, I think, than the federal budget. They reported a growth of about 40% this year. So, in the wake of the meeting, I would recommend the governors to implement the measures which, by the way, are envisaged by your instructions after your visit to Yessentuki.

Alexei Gordeyev has reported progress on all these proposals. He said that some governors have looked at their additional revenues and are earmarking additional money to support the agro-industrial complex.

Vladimir Putin: Very good. Mr Gordeyev, how is harvesting going?

Alexei Gordeyev: Harvesting is gathering momentum. We have topped the 10-million mark. As of today, July 14, 11 million tonnes of grain have been harvested. Most of it is winter barley. The yield is high, 40.6 centners per hectare. That is 9 centners more than last year. The leading areas are of course the Krasnodar Territory - 4 million tonnes, the Stavropol Region - 3.6 million tonnes and the Rostov Region - 2.5 million tonnes. Harvesting has begun in the Volgograd Region. We expect that the Saratov and the Voronezh regions will start bringing in grain harvests. Winter wheat crops are beginning to be harvested in the south. The yields are also good. The weather is favourable and we see that this year the pace of harvesting will be higher. So, the situation is good.

Vladimir Putin: All right. What about the east of the country?

Alexei Gordeyev: In the east, we have been monitoring the weather situation and watching how the plants are growing. I have been in contact with the Amur Region, the Altai Territory, the Omsk and Novosibirsk regions. So far the situation is good and because most of their crops are spring crops, one can predict that the harvest in Siberia will be at least as big as last year.

Vladimir Putin: Very good. I understand that you have discussed land issues today too.

Alexei Gordeyev: Yes, on instructions from Viktor Zubkov we have examined the issues of land relations at an enlarged meeting of the board. The Prosecutor General's Office and the Audit Chamber were present. We were vested with powers as regards agricultural land just two months ago. I must say that it is a very complicated problem. It involves land surveying, cadastre work, the development of land mortgage and the issue of bringing in abandoned land. In the years of reform 15 million hectares of land have been lost for agriculture. We see to it that agricultural land is used as targeted. We see that raiders have been in action, speculators have been in action, who see land not as a means of production but as an asset that they can use to gain profit. We have prepared an action plan. We have determined that in September Viktor Zubkov will put it on the agenda of the Government Commission on the Agricultural Complex, where all the ministries and agencies will be present. We will prepare comprehensive amendments to the legislation to address all the problems that have piled up.

Vladimir Putin: We have talked about the use of part of the land when we approved the Affordable Housing National Project. We don't want it to be a "dog in the manger" situation. We want land to be used. If it cannot be used as designated we must change the designation. I expect that you will approach the matter objectively and that departmental bias will be ruled out. We have transferred this function from the Ministry of Economic Development, the agency which deals with economic problems in general, to you, the agency directly dealing with this sphere. But issues should be dealt with objectively.

Alexei Gordeyev: We are clear about this task. In fact, we have enough agricultural land to accommodate half of the world and build housing. There is a contradiction there.

Vladimir Putin: I understand. That's not what I am talking about. There is a lot of vacant land outside cities and major communities.

Alexei Gordeyev: Yes, of course. Our approach is as follows: If there is a plan for the development of a community everything that is within its boundaries - there is no question about that - everything must be used to build housing, amenities and industrial facilities. We have no contradictions there.

Vladimir Putin: Especially since we are going to set up a fund. We should approach the matter in a practical way. Agreed?

Alexei Gordeyev: Yes.

Vladimir Putin: Mr Ivanov, I have asked you to take part in the work to develop the M5 Urals Highway in Ufa. You had a meeting with colleagues. How is the work going?

Sergei Ivanov: Yes, I was in Ufa on Friday, where we discussed the whole transport infrastructure, specifically motorways, airfields and airports.

Speaking about roads, the main item on our agenda was the prospects for the development of the federal Urals Motorway, the M5. It is a motorway from Moscow to Chelyabinsk and it is almost 2,000 km long. Transport Minister Igor Levitin together with the head of the State Automobile Inspection and representatives of other government bodies and the governors have driven along the whole route. The state of that road gives rise to serious concern.

First, it is the main transit corridor from the Asian part of Kazakhstan to the European part.

Second, in terms of the rate of road accidents, deaths and injuries that road is the worst in the country.

So, as part of the federal targeted programme, Modernisation and Development of the Russian Transport System in 2010-2015, recently approved in Sochi, 140 billion roubles will be allocated to build that road. That's the financial part.

On the other hand, as of today the M5 motorway has no surface to speak of, it is not safe and it is not fit for large long-distance lorries. There are no campsites or cafes for drivers to rest. As we have discussed it with the governor, without them we will be unable to build the necessary infrastructure. The motorway is not just the actual road surface. It also includes all the roadside infrastructure which makes it a modern motorway where drivers feel comfortable. So much for the M5 motorway.

In addition, we had an enlarged meeting of the board of Rosaviatsia attended by governors, where 10 regional governors signed an agreement putting airfields and airports on their balance sheets, that is, those of them which can be transferred to the regions under Law No. 230 passed last year. That is a major step forward. Ten major regions assume the responsibility either for the airport or both the airport and the airfield where the financial status of the region permits it. That will make it possible to invest in the development of the modern air-carriage infrastructure.

In addition, like you, we discussed the issue of aviation fuel prices in Severodvinsk on Friday. As proposed by the Federal Financial Markets Service, trial trading in aviation fuel will be held at the St Petersburg commodity exchange in July.

Rosaviatsia has also decided that the Federal Tariffs Service will establish limits on the services of fuelling complexes. To date, there are no established rules of the game there. Each fuelling complex is free to set prices for its services in delivering air fuel to the plane.

Together with Igor Sechin we are keeping watch on the situation in terms of the production of aviation fuel because this year air carriage has increased by 20%.

Air carriage in and outside Russia has grown by 20% in spite of the growing fuel prices. In future we will have to introduce a new capacity to produce aviation fuel. There is a huge shortage of it.

Vladimir Putin: A whole range of measures must be taken. We have talked about it just recently. Thank you.

Let us go on to the business of the day.

You know that we have recently discussed in some detail the need to reduce administrative barriers for business activities. I spoke about it at the enlarged meeting of the State Council. The President has issued a decree on that matter.

Today we will consider the package of laws aimed at reducing administrative barriers, in the first place for small and medium businesses.

Much has been done in recent years already. The list of licensed types of activities has been cut, the registration procedure for new companies has been simplified and the tax burden has been substantially reduced. Special tax regimes have been introduced for small companies.

The law on protecting the rights of legal entities in the process of state supervision came into force in 2001.

These measures went some way to improve the business climate in the country. Thus, the number of small businesses increased from 840,000 to 1,140,000 during these past years.

But I think you would agree with me that the private businessman still faces a lot of obstacles and problems. We should act resolutely to clear these bureaucratic logjams. The Minister for Economic Development and I have discussed it many times. I understand that the Ministry is in contact with other colleagues and has prepared these documents. I would like to say a few words about them.

A key step in this area is the switch from permit to notification procedures. The draft law proposes a simple scheme: the businessman fills out a notification and assumes an obligation to comply with the current norms and regulations. And that is all, he can start his business.

This procedure is to be introduced in the spheres where small business is most active. That is day-to-day services, public catering, retailing and automobile haulage. At the same time I believe that it is time to think about enlarging that list, for example, by adding the enterprises that work in the spheres of innovation and intellectual services.

Another problem is endless inspections of business activities. Obviously, inspections are necessary. But the regime that exists today is intolerable.

Today various government agencies carry out more than 20 million inspections a year, and that does not include tax inspections. The budget alone spends more than 160 billion roubles for these purposes, and I am not speaking about the "informal expenditures" that the entrepreneurs incur and that are much higher.

The ideology of government control must be changed fundamentally. Routine checks must not be held more frequently than once a year. And for the most part these should be documentary checks without on-site inspections. Unscheduled inspections should be made only if there are grounds to suspect a potential threat or real health hazards and environmental hazards. And, in the cases of small companies, the inspection must be approved by the chief prosecutor of the corresponding region.

Finally, the so-called non-procedural rights of the internal affairs bodies to monitor business activities must be cancelled. Police must act strictly within the framework of the law.

I have already mentioned the reduction in the scale of licensing, which is in many ways a formality.

In a number of spheres, above all, in transport, we propose to replace licensing with liability insurance. This practice has acquitted itself well in the tourist industry. It can well be spread to other industries.

Regarding the replacement of mandatory certification with the producer's declaration of the compliance of his products with quality standards, it imposes more serious obligations on business, but at the same time it relieves it of a host of unnecessary procedures and extra expenditures. There is a lot of supporting legislation in this sphere. We should take stock of this legislation without delay, without waiting until a corresponding law is passed.

I think we should ask the State Duma and the Federation Council to actively join in the process of finalising all the submitted draft legislation. These are not simple laws and they must be thoroughly examined before being adopted.

Of course these are just some of the measures aimed at supporting businesses.

Let me remind you, by the way, that we must approve the plan of measures to simplify and reduce the cost of getting small and medium companies connected to power grids by September 1. We have noted that it is one of the problems that hold back economic growth in the country as a whole. Proposals to the effect have been made. I think all that we have planned today must be done within the set timeframe.

I give the floor to the Minister for Economic Development, Elvira Nabiullina.