Transcript of the beginning of the meeting:

Dmitry Medvedev: Good afternoon, once again. I want to say a few words about the urgent issues to do with our country’s development. I will begin with demographics, which is a very important issue.

I looked at the data given to me on Friday. Overall, everything looks quite good. Why then am I talking about it? The number of children born in the first eight months of this year has increased by 82,000, which is a 7% increase on the same period last year. The total size of the population has increased in the reporting period in 38 regions, which means that the negative trend has been reversed there, so the current trend is very good. But it could be impacted by certain other demographic processes, the roots of which can be traced back to the 1990s, such as the total number of women of childbearing age. However, these are major positive indicators showing that the measures that we are taking really are helping to increase the size of the population and promote the implementation of our demographic project. We must keep moving in this direction.

Another issue has to do with the social policy for people with special healthcare needs. We have been working hard to create a barrier-free environment. In September, we discussed the implementation of the Accessible Environment for Disabled People state programme. In October, I approved measures to create conditions for the employment and professional fulfilment of people with disabilities. I’d like to remind you about our decision to annually create up to 15,000 well-equipped workplaces (for people with disabilities). We are making headway in this area as well. We need high-quality health care if we want to properly align our demographic policies. Ms Golodets, you and I went to see a new medical centre in Kaliningrad last week. It’s important to have healthcare-related government guarantees in place. I have just signed a document to that effect which is a government guarantee for providing free medical care in 2013 and 2014-2015.

This concerns the kind of health care that we should have in Russia and what we need to do to get there. What do you think is the best way to organise this work?

Olga Golodets: With regard to the government guarantee programme, I’m pleased to report that it’s expanding to include additional areas of healthcare, such as rehab after major surgeries, in addition to basic healthcare, and we are doing this in all Russian regions. Therefore, we are moving forward in several areas that include high-tech medical care, which is truly important in improving life expectancy, overall health and quality of life, and more complex health services designed to improve the health of the Russian people. These are long-term measures that require major investment covering primarily rehab services. The government guarantee programme covers patients from all walks of life, including senior citizens, newborn babies and everyone in between.

The newly drafted healthcare regulations are designed to provide customised care to each category of patients. I hope that, once adopted, this programme will help us achieve the goals outlined in the new healthcare programme which we are about to discuss and adopt soon.

Dmitry Medvedev: This is truly an important programme. I believe that the fact that this programme is in place and we are expanding the list of such cases covered by the guarantee will be instrumental in resolving major demographic problems.

With regard to energy issues, I have just signed a document on the pricing of heating. These are major and far-reaching regulations covering heating prices and tariffs, as well as rules for setting long-term regulations in this area. We used best international practices while working on this document with an eye towards boosting the efficiency of heating supply companies. Let me reiterate: this is a truly extensive document. Please note that it must be implemented in the best possible way, because heat costs account for half of the utilities payments. Customers constantly complain that their utilities bills keep rising, but they don’t understand where it comes from. Therefore, it is very important to follow up on the way the new rules are applied. In no case should they be used to further increase prices. New department-specific documents need to be drafted. We cannot delay this work. Mr Dvorkovich, please see to it that this work is properly organised.

Arkady Dvorkovich: I will. We have worked on this document for two years now. Three deputy prime ministers – Igor Shuvalov, Dmitry Kozak and I – worked on it for an extended period of time. The document is fully ready and signed, and work under it will begin in 2013. These regulations will take full effect in 2014. They cut consumers’ operating expenses under the “inflation minus” formula unlike the previously used “inflation plus” one and investors’ expenses where savings will come from consolidated estimates developed by Rosstroi. These documents should be finalised in the near future. Some of the regulations will become effective in 2013, some in 2014. The regulation covering the connection fee should come into force in early 2013. Similar to electrical supply, it will amount to 550 roubles per customer. This is a flat fee applied to all new connections without exception.

In addition, heat producers will see the upper tariff limits introduced based on what is known as an alternative boiler plant. In fact, this will establish a specific level based on the best available technology that can be used in the heat power industry. And, accordingly, all other producers cannot exceed the prices based on the best technology. Ten subordinate acts will need to be adopted in order to have all these regulations implemented, of which eight should be drafted by the Federal Tariff Service and two by the Ministry of Energy. This work is underway and we will complete it soon.

Dmitry Medvedev: All right. Mr Dvorkovich, I mentioned this for a reason. I signed a paper, actually a thick folder full of documents, and I don’t want the department-specific documents to take a long time to be developed. I don’t want the papers I signed to take effect before the departmental regulations. We need to make sure that both take effect at the same time. Please take note of this. Mr Surkov, please keep an eye on this as well. We can’t have some documents out while others aren’t ready yet.

Arkady Dvorkovich: All right, I understand.

Dmitry Medvedev: Agreed then. There’s one more issue, this time about the aviation fleet. Promoting the domestic aircraft industry is an important goal of the Government. I held a meeting on regional aviation in Novosibirsk, and we covered this subject in detail. It’s a very important issue for most of Siberia and the Russian Far East. As a matter of fact, it is important for central Russia as well.

On October 4, I signed amendments to rules for providing subsidies to Russian manufacturers of aircraft, including helicopters and aircraft engines, so that they can get reimbursed for the portion of their loan costs that are used to cover lease payments or retrofitting expenses. This kind of support has been used since 2008 even though loans were issued for only a five-year period earlier. I have lifted this restriction and I hope that this will help us extend the duration of loans which is extremely important for this kind of operations and will certainly help us implement major projects in the military and civil aviation, such as Sukhoi Superjet, MS-21, Il-476, PD-14 engines and so on. We allocated 670 million roubles to this end in 2012. This amount will more than double at 1.64 billion roubles in 2013–2014. Mr Rogozin, you know what you need to do, don’t you?

Dmitry Rogozin: Yes, I do. In addition to subsidies for retrofitting aircraft manufacturers, the Government has done a lot to support leasing companies. In fact, the Government reimburses a portion of interest payments under loans that are used to purchase Russian-made aviation equipment. I checked the numbers and it looks like this financial tool helps leasing companies cut lease payments by one third, which helps them buy more Russian-made aviation equipment. Currently, we are subsidising 22 loan agreements to buy and lease 42 Russian-made aircraft, including the Tu-204, Tu-214, Il-96, Sukhoi Superjet, An-124 and An-148.

In all, five leasing companies received subsidies worth of over 3.15 billion roubles from 2008 to 2012.

Dmitry Medvedev: What is the effective rate for such loans?

Dmitry Rogozin: We are trying to make sure that loan rates are not subject to market fluctuations. As a matter of fact…

Dmitry Medvedev: Is it reasonable if you include subsidies?

Dmitry Rogozin: Yes, it’s acceptable for leasing companies.

Dmitry Medvedev: I’m asking this because, for various reasons, loans rates in our country are going up fairly quickly, and industrial enterprises are complaining about it. Of course, the banks don’t do this maliciously. It reflects the general situation in our economy and worldwide where the liquidity in Europe is almost non-existent and global financial markets are plagued by problems. Anyway, the funds that we use to cover their loan expenses should serve to make them more comfortable. I don’t want subsidies to do nothing to improve lending rates.

Dmitry Rogozin: Mr Dvorkovich and I have held a meeting on supply and demand on the market of aviation equipment. One of the participants, Ilyushin Finance leasing company, said that lease subsidising on behalf of the Government allows them to be quite competitive on this market.

Dmitry Medvedev: Mr Dvorkovich, what is the current applicable rate after all?

Arkady Dvorkovich: It’s under 5% including subsidies.

Dmitry Medvedev: Less than 5%? That’s good.

Dmitry Rogozin: The consolidated government order for aviation equipment is another important consideration. We have held a meeting in Ulyanovsk chaired by the President to discuss this. The Ministry of Industry and Trade is completing the work on forming this market and organising the aircraft industry. We will report about this work to you in November.

Dmitry Medvedev: Good. This programme is very important for the industry, which hasn’t been financed for a long time and which we are now trying to revive.

I think we have covered almost all issues now. There’s one more left, though. We held a meeting on privatisation on Friday and some of our colleagues took part in it. We agreed to move forward with privatisation, because it’s important for the economy. We need to make all the decisions, including preventing state-run entities from participating in privatisation. This shouldn’t happen. A state-controlled company cannot participate in privatisation since this will defeat the purpose of privatisation. However, if there are any formal criteria, then we should draft and put into effect rules of admittance to such auctions as agreed.

Once again, Mr Dvorkovich, please let the Ministry of Economic Development and other deputy prime ministers know that I’m expecting them to come up with proposals soon. These regulations should be out as soon as possible. Agreed? Thank you.

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