Transcript of the beginning of the meeting:

Dmitry Medvedev: Colleagues, let’s get to work. Today, we are meeting on the last day of spring in order to discuss issues that are of great importance for this country. These are seasonal issues. We will sum up the results of the work of the municipal utilities and power supply services during the past winter season. We will have to decide what should be done prior to the upcoming heating season. And, of course, we always try to do this in advance for obvious reasons.

First, let’s discuss the 2011-2012 season. On the whole, the services were carried out in a satisfactory manner. The heating season was launched on time and proceeded without any substantial setbacks, despite freezing temperatures in early winter. Nationwide power consumption increased by 1.6% from October 2011 to March 2012. Power-generating enterprises fulfilled specific fuel quotas for the first time. We commissioned power-generating equipment with a six gigawatt capacity. This is quite impressive  an increase of almost 100% on 2010. There are some other useful statistics, and I hope that the ministers will mention them.

The commissioning of the fourth reactor at the Kalininskaya nuclear power station became an important event for the Central Russian power grid. As a result, Central Russia now has a more reliable power supply network. As for the housing/municipal utilities sector, most reports are quite optimistic. However, not all regions were able to conduct timely, well-planned and well-conceived preparations. The relevant planned allocations for repairing or replacing rundown or dilapidated heating mains and water supply networks were too small. Too little attention was devoted to preparing hydro-technical facilities and transformer substations. All this should be analysed. Consequently, we should take into consideration all miscalculations of the previous period and focus on repairs of heat supply systems, the preparedness of engineering mains’ equipment and, of course, the training of skilled personnel. Naturally, such work should be done systematically.

In this context, I hereby instruct the Ministry of Energy, the Ministry of Regional Development and the Federal Service for Supervision of Environment, Technology and Nuclear Management (Rostekhnadzor), as well as regional executive agencies, to check the preparedness of power-generating and heat supply enterprises for the next winter season. A new statute that will make it possible to check the readiness of power-generating companies for the fall and winter period is to be approved in the second quarter of 2012.  The relevant documents certifying their readiness should be issued only if fuel delivery contracts have been signed for the entire heating season, and if long-term framework agreements for the delivery of reserve fuel types have also been signed. I specifically ask regional officials to personally supervise the supplies of fuel and material resources to the Far North areas and equated localities.  The Regional Development Ministry is the chief agency here. Let me remind you that we already discussed these issues at our meeting on May 24, so this is nothing new.

Finally, the Defence Ministry needs to analyse the problems which plagued a number of military compounds last year. This should be the focus of attention now. All the facilities in question should be prepared for the heating season in good time. Please report back on this.

A few words about power services and other utilities and their debts. Over the last five years, arrears have grown tenfold on the wholesale and retail markets alike, totalling tens of billions of roubles. I will not cite the figures now; the ministers will provide you with them.

It is important to analyse the reasons for the accumulated arrears at all levels. Steps need to be taken to repay the debt to resource-distributors and avoid accumulation of new debt in the future. The results of this work need to be reported to the Regional Development Ministry by September 1, 2012 and to the Government by the end of September.

There is something else I would like to discuss before we get started. I am talking about discipline. I don’t want to state the obvious here, colleagues. You are perfectly aware that order and protocol are important indicators of the quality of civil service. Heads of federal agencies and top regional officials are personally responsible for the timely fulfillment of the president’s and government’s orders. We have many issues to address and how well we do it depends on the officials present. To ensure proper and consistent supervision of the process, I believe it’s right to entrust one deputy at each ministry or agency with supervisory authority. I have already signed a resolution on this. I would be grateful if you could have a think, who of your deputies would be best for this. I would like the leadership of the Government Executive Office to report once every six months on how the supervision is going and how orders are being fulfilled, unless there is something more urgent that needs to be reported on.

Let’s get started. We’ll begin with the reports. The Energy minister will go first. Go ahead please.

Alexander Novak: Mr Medvedev, members of the government.

Last week the prime minister held a conference call with the Russian regions, during which they discussed the results of the last heating season and the problems encountered. In my report I will give you some details and figures and talk about the lessons we learned, as well as the new goals facing the Energy Ministry in the run-up to next winter.

The work of electric power companies in the 2011-12 autumn-winter period was characterised by the stable operation of Russia’s unified energy system during the entire winter period, with an all-time high in electricity consumption of 155 gigawatt in the country’s power grid observed in February 2012. The new record resulted from the growth of the national economy, which has led to constantly increasing energy consumption in the past several years.

Dmitry Medvedev: Excuse me, Mr Novak. I would just like to mention that everything the minister is saying is available on our iPads, so I think we should follow along during the report. Thank you, go ahead.

Alexander Novak: Thank you. This record consumption was also caused by extremely low temperatures and difficult weather conditions in Russia in January and February. Overall, despite the industrial and natural challenges, energy workers ensured the stable supply of power and heat to consumers, while the measures taken in the run-up to the previous heating season reduced the risk of accident at electric power facilities.

In the power supply network, the number of interruptions on electricity transmission lines fell by 2.4%. There has also been a positive trend at power generation facilities – the  number of accidents resulting in a loss of capacity at stations with capacity 150 megawatts and more fell by 10.4%, while the total interruptions in power supply for consumers of 10 megawatts or more fell 4.5%. Although these figures are optimistic, we are charging energy companies with the task of increasing their responsiveness to any technological violations as much as possible. In this regard, we rely on the experience of previous years, as well as the experience we’ve gained and the conclusions we’ve made during this season. Let me give some examples. In early 2012, we faced a difficult situation with fuel supplies for certain thermal power stations whose supply contracts ended on December 31, 2011. Due to disagreements with suppliers, contracts for 2012 were not signed and supplies were discontinued beginning January 1, 2012. The fuel necessary for producing thermal power was taken from storehouses. The ministry acted quickly to deal with the situation. We had to micromanage the process, facilitating fuel supply contracts, which is unusual. The system should work without any micromanagement. To prevent such situations in the future, a clause stipulating that a company must have a signed fuel supply contract for the entire heating period was appended to the regulations on inspecting electric power facilities’ readiness for the autumn-winter season.

In addition, the autumn-winter season revealed that certain design solutions used in the power supply network are not suited for certain weather and climate conditions, such as and the weather challenges we faced last year. The ministry has developed technical measures to increase the reliability of certain power networks. Overall, I believe that we need to once again assess the reliability of Russia’s power grid well in advance with due account for critical peaks with regard to climate conditions.

Another measure, which has been introduced by the Energy Ministry and which will allow us to increase the reliability of work during the autumn-winter season, is increasing the liability of power station directors for non-compliance with standards for fuel reserves for accounting dates, with the possible penalty of a three-year disqualification. We have also drawn up amendments to the Code of Administrative Offences, which provides similar liability for failure to obtain a certificate of readiness. In addition, the energy companies and the Ministry of Energy have launched hotlines in order to ensure more effective feedback with the population.

Mr Medvedev, I would like to ask you to instruct the Federal Agency for State Reserves (Rosreserve) to work on issues regarding the creation and deployment of special-purpose equipment reserves and reserve power-supply sources for use in the event of an emergency. This will make it possible to expedite clean-up operations. The relevant procedure for allocating such equipment from Roseserve stocks in case of emergency should also be simplified. Such instructions should be formalised in the government’s May 31 resolution.

The accumulation of sufficient fuel reserves needed in order to make it through the autumn-winter season with no problems is a high-priority objective facing energy supply companies. In this regard, the Ministry of Energy approves monthly fuel quotas and oversees their daily fulfillment.

Under the relevant quotas, the following amounts of fuel should be stockpiled prior to the 2012-2013 heating season:

Coal: 12.6 million tonnes;

Boiler oil: 2.6 million tonnes;

Diesel fuel: 128,000 tonnes;

Peat: 41,000 tonnes.

I believe it is important that this parameter should not set the average nationwide quotas, but that it should be fulfilled in the context of each enterprise. Actually, every enterprise stockpiling fuel reserves had to fulfill the relevant quotas. In an effort to oversee fuel supplies for power stations, the Ministry of Energy has established a working group and has resumed weekly teleconferences involving representatives of energy supply companies, fuel suppliers and railway companies.

Prior to the next heating period, the ministry will single out high-risk regions well in advance. The slides show which regions these are. This includes power grids, where limited consumption is highly likely to be introduced in the event of power-generating and power-transmission equipment shutdowns. At present, high-risk regions include the Sochi power district of the Kuban power grids, the Dagestan, Primorye and Sakhalin power grids, as well as some districts of the Irkutsk and Tyumen power grids. Each region receives a list of measures enabling it to reduce such risks. We monitor the situation in these regions particularly closely.

Repairs of power-generating equipment and power-transmission networks are a highly important aspect of power-generating and energy companies’ work prior to the winter season. The annual plans of such companies call for the repair of turbine-driven generators, boiler units, power-transmission lines and heating mains. The presentation also shows the physical parameters of repair projects. It should be noted that the volume of planned repairs for the upcoming season exceeds those for the 2011 period. This is a positive fact that will influence the reliable operation of equipment during the autumn-winter season.

Regular payments on the wholesale and retail power markets are an important factor contributing to timely and full-scale repair programmes. You have mentioned this in your introductory remarks. Delayed payments make it more difficult to conduct repairs and to purchase fuel. Such delayed payments negatively affect preparations for the winter season and the financial stability of power-generating companies. Unfortunately, the volume of debts on the wholesale power market increased by 30% in 2011 and reached 30 billion roubles in late 2011. Heat-energy debts increased by 19% in 2011 and reached 97.2 billion roubles. I would like to point out a positive aspect in this. Retail-market debt volumes have decreased by almost 15% down to 80.4 billion roubles. As you know, the Ministry of Regional Development has issued Order No 530, dated November 9, 2011, on establishing an inter-departmental commission that will restructure and repay specific debts that are owed to enterprises of the housing/municipal utilities sector. Mr Medvedev, I would like to suggest that the commission’s status be raised, and that its line-up be approved by a government resolution. This will ensure the effective work of the commission. The commission should also comprise representatives of the Prosecutor-General’s Office, the Investigative Committee, the Interior Ministry and the Federal Security Service for a more prompt response. In addition, the Ministry of Energy is now working to create a modern payment system, which is intended to improve payment discipline, to increase transparency and to eliminate abuses.  

Colleagues, the prime minister has addressed power-generating equipment issues in his speech. I would only like to note that power-generating equipment with a capacity of six gigawatts was commissioned last year, an all-time high since 1985. Power-generating equipment with the same capacity will also be commissioned this year. This exceeds specific average levels for the past few years by three times. For reference, we plan to commission the two gigawatt Boguchansk hydro-electric power station; the 836 mWt Nyagan state district electric station in the Khanty-Mansi Autonomous Area; the Urengoi state district electric station and the Right Bank Thermal Power Station No 5 in St Petersburg in 2012. New power-transmission lines measuring over 22,000 km long with an apparent power of almost 30,000 megavolt-amperes will be commissioned this year. As a result, this will facilitate the more reliable operation of the power grids. This exceeds last year’s transformer capacities by 9%.

Investment is another important factor affecting the development and reliability of an energy system. In 2012, the planned financing under public and private energy companies’ investment programmes will exceed 1 trillion roubles, almost 16% above the actual level of financing in 2011. The timely fulfillment of investment plans will help reduce the number of high-risk regions.

To check the regions’ preparedness in September, as part of my new responsibilities, I will establish commissions at the Energy Ministry, which will include representatives of the Federal Service for Ecological, Technological and Nuclear Supervision, the Emergencies Ministry, regional executive bodies and the systems operator. The plan is to inspect 100% of energy companies and facilities – a total of 536, including 61 energy companies.

A government commission for security of energy distribution has been established to ensure reliable supplies, the so-called federal headquarters that coordinates the work of regional headquarters that operate in each of Russia’s regions.

While we discuss preparations for next winter, I would like to raise the issue of mandatory energy audit. This audit is aimed at estimating the actual volume of energy resources consumption, identifying the potential for energy saving and working out specific policies to increase energy efficiency in the Russian economy. In compliance with the energy saving law, a mandatory energy audit should be conducted before December 31, 2012. Overall, 440,000 energy facilities need to be inspected, with a special certificate issued to each of them. Unfortunately, as of today, only 11,000 certificates have been submitted to the Energy Ministry, or less than 10%. We believe there are several reasons for this delay. One of them has to do with the poor quality of the energy audit services in the absence of an effective system of quality control and responsibility, or a single methodology centre, uniform auditing standards, and underfinancing by the regional governments and companies responsible for energy audits.

Having analysed this situation, we propose changing the energy saving law to increase the professional requirements for auditors, to tighten the responsibility of self-regulatory organisations and auditors for the quality of the work that they do, and to authorise the Energy Ministry to approve requirements and energy audit regulations, including recommendations of the pricing of services. The ministry has drafted amendments to the law and will submit them to the government soon.

While going over our tasks relating to the preparation for winter, I would now like to focus on a few of them (there is a full list in the presentation). First and foremost, the Energy Ministry needs to ensure control over the preparation of energy facilities for winter in accordance with the approved plans, including completion of the required repairs, investment programmes and stocking enough fuel. It also has to compile a final list of high risk regions and work out measures by which to reduce these risks. The government commission for the security of energy distribution needs to approve in the second quarter a finalised regulation on assessing energy facilities’ readiness for winter.

Mr Medvedev, we will assess the preparedness of energy facilities by November 15 and I will submit a report before November 25. I will personally see to it that the instructions you gave during the conference call with the regions are carried out. I plan to start holding on-site meetings on preparations for winter soon. This concludes my report. Thank you for your attention.

Dmitry Medvedev: Thank you, Mr Novak. Please, report back according to the plan. Please, have a seat. If any of you have anything to add, please try to be concise. Oleg Govorun, Minister of Regional Development, go ahead, please.

Oleg Govorun: Mr Medvedev, colleagues. The 2011-2012 heating season generally went more smoothly than in previous years. A total of 18 emergencies occurred at vital systems during that period, including four minor emergencies and 14 accidents, down 18% from 22 the year before. The number of technological breakdowns and violations decreased from 19,500 to 15,500. For the first time in years, Russia spent the New Year holidays without major accidents. These improvements were due to consistent efforts to improve order as well as to repair facilities well in advance. The following projects were implemented in order to successfully go through the heating season. Reserve equipment comprising more than 6,000 mobile diesel generators, 85 modular mobile boiler rooms and over 700 stand-by boilers was stockpiled as part of material-technical resources, making it possible to prevent emergencies at facilities of the housing and utilities infrastructure and to conduct clean-up operations. We accumulated emergency boiler oil reserves totalling 167,000 tonnes in conjunction with the Federal Agency for State Reserves in 11 regions of the country at 13 sites. This reserve will help eliminate possible boiler oil shortages during the peak winter heating season. At the beginning of the heating season, over 98% of housing and utilities enterprises had the required amount of material-technical resources for coping with emergencies at infrastructure facilities that provide people with heat, power and energy. Almost 100% of municipal entities established emergency rescue units for conducting clean-up operations at the aforementioned infrastructure facilities. We conducted an inventory of material-technical and financial resources for coping with emergencies at such vital infrastructure facilities and updated their stocks. Various plans stipulating cooperation between the Department of Housing and Utilities Infrastructure, the Ministry of Regional Development and emergency dispatch control services were formulated. Participants in monthly teleconferences examined and oversaw plans for implementing specific projects prior to the winter season. Organisational conferences were held in every federal district. In February 2012, a nationwide teleconference was held in conjunction with the Ministry of Energy. This teleconference produced positive results, primarily in the sphere of monitoring price growth. I believe that this should also be done in the future. Considering the experience of previous years, we introduced additional stand-by diesel generators and low-capacity power stations. Consequently, the share of heat-supply enterprises with reserve power-supply sources reached 81% prior to the heating season, and the share of water-supply and water-drainage enterprises with such sources totalled 77%. Such parameters were considerably lower only a few years ago. We will continue to do our best in order to equip vital infrastructure facilities with reserve power-supply sources.

Basic and reserve fuel volumes were spent and replenished during the 2011-2012 autumn-winter period in line with the relevant timeframes and met fixed fuel quotas in most Russian regions. However, unfortunately, reductions in fixed fuel quotas created pre-requisites for shutting down boiler rooms in Buryatia, Karelia, the Trans-Baikal Territory and the Irkutsk and Novosibirsk regions. Certainly, we will monitor the situation in such territories more closely and in line with tougher standards.

I would like to single out the territories that were best prepared for the 2011-2012 heating season, and which successfully went through that season. Such territories include the city of Moscow, the Rostov Region, the Voronezh, Tomsk and Sakhalin regions, as well as the Yamalo-Nenets Autonomous Area. Considering the experience of the past few years, we have organised preparations for the next heating season. On May 29, we have held a nationwide teleconference with regional leaders. I would like to say a few words about specific objectives, which were jointly charted by teleconference participants.

By June 15, Russian regions will have to finalise plans on preparations for the heating season. By August 1, they should sign fuel delivery contracts, primarily boiler oil delivery contracts, for the entire heating season. By August 15, they should ensure the concentration of financial resources to facilitate preparations for the 2012-2013 autumn-winter period. They should also submit reports on debt reduction and restructuring by the same deadlines.

The regions are to conclude agreements on leasing thermal power facilities by September 1 because it is necessary to formalise the commitments of the operators; ensure timely fuel supply to the districts of the Extreme North and similar territories with the same needs by September 15; conclude the review of readiness for the upcoming heating season jointly with interested federal executive bodies by November 1. The reports on approval of the plans for winter preparations, taking into account our recommendations, will be submitted to the Ministry of Regional Development of the Russian Federation by 20 June.

Every year by the end of the autumn-winter period we see a tendency for accounts payable for fuel and energy consumption to accumulate and grow. Currently it amounts to a rather high level of over 107 billion roubles.  

I’d like to note that fuel and power make up a considerable proportion of the expenses of heating supply companies and water and sewage companies. Mr Medvedev, I’d like to ask you to consider the option of issuing an instruction on extending subsidies to regional budgets to compensate heat supply companies for costs related to unscheduled fuel price changes and additional fuel spending due to low temperatures in the last autumn-winter period.

In conclusion I’d like to say that in summer, the Ministry of Regional Development jointly with regional executive bodies and local governments, will perform the tasks set before them, will prepare regional utilities for the winter heating season of 2012–2013. Within the established terms I will submit a report on the readiness of national utilities for the heating period. Thank you. 

Dmitry Medvedev: Thank you, Mr Govorun. Please, take a seat. We have heard two reports. Any thoughts on what we have heard? Go ahead, please.

Mikhail Abyzov: Mr Medvedev, colleagues, I’d like to support Mr Govorun’s proposal on possibly extending subsidies to some regions due to the rise in fuel prices and the unexpected low temperatures. Indeed, utilities in some regions, the unitary enterprises, are facing bankruptcy. Their expenses have grown considerably, and power and heating prices have not been indexed since January 1. And this problem needs a solution because otherwise it will be difficult for our colleagues to prepare for the next heating season. This is my first point.     

Second, the reports include large sections on governmental supervision of winter preparations. This is always an issue. I think perhaps we have this dream that some time in the future the government will not have to keep this issue under permanent control, but for the time being supervision is important and we exercise it. This entails significant cost and is a burden for the companies operating in this sector, because we really keep a close watch on both the standard fuel reserve stocks and the repair programmes. This is an important aspect.  At the same time, I suggest that we should pay more attention to self-regulation and introduce higher fines for companies if they fail to honestly perform their vitally important function of preparation for the heating season and failsafe seasonal performance. I think fines will be better incentive than the administrative pressure of monitoring them. If you fail to get a certificate of readiness, you have to pay for it; if you have no stored standard resources, you have to pay the fines. In this case the government will have a lower load, and I think this will be an efficient mechanism. By combining less administrative pressure upon them with greater financial penalties, I think in some 15-20 years the procedure will be streamlined without any federal involvement.

Dmitry Medvedev: I see your point, Mr Abyzov, thank you. I’m not as much of an optimist. Not because we cannot self-organise and not because the rules of self-regulation will fail to get off the ground (hopefully, they will start working, you are right, that would be very useful). It is just that this country is so diverse and its territory is so vast and complex that I think the government will have to address this issue in any situation one way or another. However we should indeed minimise this targeted intervention, and this is one of the objectives of the government.

Please, Mr Khloponin, go ahead.

Alexander Khloponin: Mr Medvedev, in terms of the draft protocol decision I’d like you to issue an instruction to the Minister of Energy to hold a meeting on urgent issues regarding the North Caucasus. The region has a critical situation with debts in the gas sector and in the power sector. In the first quarter, the gas debts grew by 8 billion roubles, electricity debts grew almost by 5 billion roubles, and I’m afraid we will confront a real problem here. Meanwhile the population pays 98% of their bills. The debts are due to speculations and machinations in this sector, due to dishonest mediators. The law enforcement agencies should look into the situation.

Dmitry Medvedev: Thank you. I think it would be right to look into the matter and to hold a meeting. Look into it, please. Mr Dvorkovich, go ahead, please, and then Mr Siluanov.

Arkady Dvorkovich: I’d like to highlight two points. First, fuel purchases for the autumn-winter season. Our seasons have their own specific characteristics: farming has one seasonal character, while housing utilities have a different seasonal character. According to the data I have, it is necessary to purchase fuel starting right now. At least, after the sowing season the time will be most favourable in terms of prices and the availability of fuel for purchase – not in August, not in September, not in October but in June this year. And we should draw the attention of the regions to this. I’m ready to do this on my own, without an instruction from the government, if there are no objections.    

Second, signing contracts for the whole period of work. Now there are year-long contracts on some components, there are short-term contracts on other components. In my view, it is necessary to issue an instruction to switch to medium-term and long-term contracts on supplies of basic types of energy resources in this sector. Thank you.

Dmitry Medvedev: Thank you. Please, Mr Siluanov, go ahead.

Anton Siluanov: Thank you, Mr Medvedev. I only want to question the logic of extending subsidies to regions to compensate for unscheduled expenses due to rising fuel prices.

Last year we did not have such critical and long periods of cold weather, but temperatures vary from year to year. I don’t think we should talk about the need to subsidise from the federal budget something that we are not supposed to do (regulation is primarily the responsibility of the municipalities and regions)... Otherwise we may create a bad precedent. The regions will expect these subsidies since temperatures will change with every passing year. Is it worth encouraging such expectations? I have serious doubts about this.

Of course, the question of balancing out the budgets of the regions that are primarily responsible for monitoring the fuel sector (above all, heat-supply companies)… Let me repeat that this is a regional and municipal responsibility. I’m afraid we may create a precedent here of permanent subsidies and make the federation responsible for temperature changes. I think this would be wrong. Thank you.

Dmitry Medvedev: Thank you, Mr Siluanov.

Okay, let’s wrap up. Would you like to say anything else, Mr Kozak? Please, go ahead.

Dmitry Kozak: To begin with, I’d like to support Mr Siluanov. We will indeed be creating a precedent. If we allocate subsidies to cover temperature changes, we will create a precedent and will have to pay for each degree of digression. Such proposals were submitted every year and we tried to avoid them and to determine subsidies, and not even subsidies, but methods of their distribution with a view to having balanced regional budgets. We also took into account other criteria that were linked exclusively with fuel price fluctuations. But we didn’t consider temperature changes and I think it would be wrong to consider them. I’d support the Ministry of Regional Development only on fuel price fluctuations.

The second issue that I’d suggest including in the protocol decision is connected with the ongoing transfer of the utility services, heat and electricity supply facilities from the property of the Defence Ministry to municipal property. This process has been going on for two years now. There are natural conflicts between the Defence Ministry and the regions. We have further intensified them by adopting a norm in the law on the 2012-2014 budget, which requires that the transfer of these facilities be accompanied by the redistribution of funds from the Defence Ministry to the regions. That said, we have not transferred a single kopeck there (this was a directive last year and now it has become law). Regions are expecting the funds and are refusing to take charge of these facilities for lack of money that they are entitled to by law, as it were.

We have passed a relevant law without settling the difference between the Finance Ministry and the Defence Ministry. The Defence Ministry insists that money is not provided and does not exist, whereas the Finance Ministry argues that the money is there. Yesterday, I held a meeting with all parties concerned and we agreed on a plan of action. We should either endorse the methods of counting the funds for the facilities transferred to the regions until June 15, or if there is no money at all, we must conduct an audit and make another decision as a guide for the regions. Otherwise, neither of the two ministries will take care of these facilities and they will not be ready for winter.

Secondly, I think it is necessary to add this instruction to the protocol decision (as we did with government decisions every year) – we must instruct the regions to draft well-substantiated time tables for winter preparations. They must be justified because they often plan everything in order to be able to report that all facilities are ready, but this is only true on paper. Therefore, the Ministry of Regional Development must primarily analyse these plans to make sure they are adequate and monitor their implementation. The regions must understand that based on this follow-up the government will see what regions have dealt with this assignment and how.

I have one more important point following our meeting yesterday with the Defence Ministry. We must instruct the regions to guarantee uninterrupted operation of the facilities that are becoming their property. Under the law adopted last December, we have the right to unilaterally transfer… The Defence Ministry can single-handedly transfer facilities to the regions, but the regions do not appoint any managing company to be in charge of them and they end up suspended in limbo. I think these two points should be reflected in the protocol decision.

Dmitry Medvedev: Thank you very much, Mr Kozak. Now I’d like to hear from the Defence Minister. Mr Serdyukov, please go ahead.

Anatoly Serdyukov: I’d like to add a few words, if I may. First, we do not transfer any facilities to the regions without their consent and therefore, by definition they cannot be in limbo between the Defence Ministry and the regions. This is my first point.

Second, last year we made a decision to establish a government commission headed by Mr Kozak, which would include representatives of the Defence Ministry, the Ministry of Regional Development and the Finance Ministry. The task of the commission is to review all applications made by the regions and decide what allocations should be made to restore these facilities and what funds are needed to maintain them.

This year we have a budget deficit, as we did last year. Our ministry needs an estimated 130 billion roubles for the upkeep of all housing and utilities stock. We have received 60 billion roubles that have been allocated, and are currently short of 70 billion roubles. It would be pointless to start transferring these facilities with a shortfall, and I suggest that we abide by the decision that was made last year. This commission should begin working and should review all applications on a case-by-case basis. Needless to say, we won’t stop the operation of a single facility until we transfer it officially. Thank you.

Dmitry Medvedev: Thank you, Mr Serdyukov. Now let’s hear what Mr Kozak has to say in response. So, did this commission work or not?

Dmitry Kozak: This commission did not exist. I don’t know anything about this decision, so maybe it’s a proposal by Mr Serdyukov. I think there is no point in setting up commissions.

Dmitry Medvedev: I’d still suggest that you check on this commission.

Dmitry Kozak: Sure.

Dmitry Medvedev: Because most likely some suggestions on this issue must have at least been discussed. At any rate, the issue that you’ve raised and about which Mr Serdyukov has just spoken is very urgent. I will tell you straight that during my trips around the country governors very often complain that this situation… I don’t know how to put it – it is sort of hanging in the air or something is not being done… I don’t want to blame anyone now. We must get to the bottom of this. Therefore, upon completing this discussion, we should supplement the protocol decision with a requirement to register the transfer of every facility on a time table. Mr Kozak, please hold a meeting on this issue, and I’d like to ask the governors to monitor this transfer personally – as was proposed for fuel deliveries and the endorsement of justified schedules for the preparation of energy supply companies. All these points must be reflected in the protocol decision.

As for subsidies, this is a difficult subject and we tried to avoid it. But since it was raised again, I have a simple proposal. I don’t suggest that we resolve it there and then. Let’s just calculate how much it will cost. So, I propose that we enter this instruction into the protocol decision but not as the need “to discuss the allocation of subsidies” but as the need to estimate the potential financial effect from them.

And, finally, I’m not against changing the status of the commission. Please submit relevant proposals through the Government Executive Office.

As for long-term contracts that Mr Dvorkovich suggested, I think that they make sense. However, they should be introduced as the relevant companies are ready to sign them.

Are we agreed? The decision has been made taking into account the discussions and adjustments that I have just made.

 * * *

Following the meeting, Prime Minister Dmitry Medvedev instructed the heads of the federal executive bodies:

- to ensure the timely implementation of the assignments and instructions issued by the President of the Russian Federation and the decisions of the government, with the necessary attention to a detailed and meticulous examination of the issues at hand;  

- by June 9, 2012, to designate a deputy prime minister to coordinate the implementation of the oversight activities.

Mr Medvedev also instructed Deputy Prime Minister and Chief of the Government Staff Vladislav Surkov:

- to report every six months on the state of the oversight activities and the implementation standards in the federal executive agencies.