Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, ladies and gentlemen.

Let us start with exchanging the latest news. Mr Kudrin, we have agreed for you to make weekly reports about the government funding of particular economic branches. How is the budget being implemented?

Alexei Kudrin: Mr Putin, the first relevant figures for the first half-year have just come in.

Government expenditures amounted to 3.922 trillion roubles, or 40% of the year's expenditures, retaining roughly last year's rate though average monthly expenditures exceeded last year's by 650 billion roubles.

The rates were not so bad though expenditures have grown this year. As for key ministries, the Transport Ministry has been working smoothly and has made many contracts, on which it has paid 30% of advance payments. Final payments will be made after acceptance-that is, toward the end of the year, in compliance with the Russian legislation.

The Defence Ministry has arranged its government contract campaign even better than last year, and has made more than a half of the year's payments as cash execution. It expects to make the rest of payments by September.

Some ministries and agencies are lagging behind them. 41 key spending units have used up more than 40% of budget expenditures earmarked for the year, and another 37 units more than 30%. That is, 60% of all government-paid companies and offices have spent more than 30-40% of their budget allocations-about the same rate at last year's. But then, this year's budget exceeds last year's, and average monthly expenditures for the second half-year should exceed 900 billion roubles.

We should take seasonal fluctuations into consideration here-the winter peak of fuel, energy and heating payments, and investment contract payments due at the end of the year after advance payments.

Here is a monthly cash budget. We have been drawing such budgets since 2002 with ministries contributing. They are not too careful about it, to tell the truth, but we are ready to report about work on all available contracts every week. And we are making it a point to achieve greater regularity in expenditures.

Vladimir Putin: That is a must! I call all my colleagues to make their work smoother and guarantee regular financing without putting it off to the year's concluding months. I also ask the Finance Ministry to go on with monitoring and weekly reports.

I have signed a resolution to increase the Vneshtorgbank authorised capital by 180 billion roubles. How does it intend to use the money?

Alexei Kudrin: Mr Putin, we are very particular about banking assessment and guarantees of bank capitalisation sufficient for bankers to afford regular crediting and private deposit servicing. Capitalisation instruments include subordinated credits from the National Welfare Fund through Vnesheconombank and direct budget allocations the kind of which we have already made to Vnesheconombank and Rosselkhozbank.

The State Duma has just passed a bill on bank capitalisation through federal loan bonds. We will make relevant budget amendments urgently.

The 180 billion rouble allocation to Vneshtorgbank will make it more reliable in an avalanche of bad credits, though their total amount does not give grounds for alarm at present.

At the same time, it is our duty to take timely prevention measures and guarantee banking stability. Vneshtorgbank will soon convene a meeting of its private and other holders in connection with the Government resolution, and propose a new emission, to which the Government will contribute 180 billion roubles through the Federal Property Management Agency. Other holders are welcome to join.

Vladimir Putin: I have just visited the Rostselmash farm machine plant to see our anti-crisis measures in action. Things are not so bad, on the whole. Our troubleshooting measures work. The company has sufficient contracts, and has retained its personnel.

There are problems, however. Company managers and holders pinpointed them during our short talk, and gave advice how to cope with those problems. One of them concerns government guarantees to promote export-oriented production. The budget earmarks a billion dollars for the purpose. The company does not think these guarantees are obtainable at all due to red tape in decision-making and procrastinated paper drawing.

Please say what is going on and what should be done to make the proposed economic tools effective.

Alexei Kudrin: Mr Putin, export crediting guarantees are usually made for Russian exports to the developing countries, which really need Russian farm and other machinery. The Government of the importer country-within or outside the CIS, as the case may be-usually makes counter-indemnity in case of such Russian-guaranteed tied loans. A first-rate bank can also make guarantees.

Companies based in such countries are usually hard put obtaining necessary guarantees, whether from the Government or a bank. When Russia was using such guarantees from Germany (KfW and Hermes) and Italy (SACE), it usually offered state counter-indemnity because loans were usually intended for companies in need of extra support.

That is the main obstacle today to any sizable promotion of such guarantees. Vnesheconombank and our ministry are drafting the concept of an insurance agency that would be more flexible about guaranteeing and insuring such credits.

The concept will be ready by autumn, and we will try to be more versatile in supporting exports from Russia.

Vladimir Putin: Why so late? July has just set in. Try to be quicker with the job.

Alexei Kudrin: I think we can make it a month.

Vladimir Putin: Good. The other matter posed by manufacturers concerned the performance of Agroleasing. Roughly 5 billion roubles has been allocated, and they feel it. 1,272 units of farm machinery have been purchased, and a majority delivered to clients by now.

The company says, however, that Agroleasing should be m ore predictable than it is-manufacturers should know what they can count on in the near future. True, seasonal ups and downs cannot be avoided in agriculture-related industries but seasonal fluctuations can be disastrous during a crisis. The company is expecting a depression in autumn and wants to know in advance what Agroleasing can do for it. What its purchases will amount to, if any?

As for small and medium-sized companies, they have practically no access to Agroleasing loans and services. Please, Mr Zubkov, pay more attention to it. This request concerns other ministers, too.

As for the transparency of Agroleasing, please ponder the matter over and advance your initiatives.

There is another Rostselmash proposal I approve. It concerns grain market interventions. Farmers have many problems getting bank loans. If only they had written pledges from the government on prospective purchases of a guaranteed amount of grain, bankers would loan easier, and farm machine manufacturers would have not so many problems with sales. Please take stock of this matter, too, and tell me what you think of it.

As we have digressed to the automotive industry-even as regards agriculture, I want to inform you that I have signed several Government resolutions pertaining to support of the automotive industry as a whole. As you might remember, we subsidise 2/3 of the credit refinancing rate for cars whose price does not exceed 350,000 roubles. Of course, Russian-manufactured cars account for a majority in this price bracket.

I told the Industry and Trade Ministry to think the matter over. Mr Khristenko has analysed it, and I have signed an executive order today to raise the relevant price ceiling to 600,000 roubles and extend the list of eligible makes. The arrangement will amount to car price reductions-I mean that we will subsidise financiers' missed profits at 2/3 of the Central Bank refinancing rate. It concerns, I repeat, cars weighing no more than 3.5 tonnes and costing 600,000 roubles at most.

So the arrangement will include not only cars but also small lorries.

Proprietors of small and medium businesses can take such car loans in private purchases.

Another measure envisages cutting the first instalment in car loans-15% instead of previous 30%.

Next, Russian leasing companies will be granted federal subsidies, for which car manufacturers asked the Government back at the beginning of the year.

I think all those measures will give our automotive industry an impetus.

Mr Khristenko, do you want to add anything? You are welcome.

Viktor Khristenko: As far as soft private loans go, there is another landmark innovation apart from those introduced by the latest decisions. I mean steady three year credit time limits. The term is 36 months now.

Vladimir Putin: Instead of 24 months.

Viktor Khristenko: The payment deadline has been put off from December 31, 2011. Budget resources have been redistributed similarly to guarantee a sufficient number of car loans, including fiscal year 2012.

More banks will make soft car loans, so this service will be easier available and attract more clients.

Another resolution you have signed concerns car shipments to the Russian Far East. Privileges previously involved only a limited approved list of cars. Now, the list includes also Russian-manufactured commercial lorries, such as Gazelle, Sobol, UAZ and Ducato, to make them affordable in that part of the country.

Vladimir Putin: All in all, approximately 25,000 vehicles will be obtainable on such terms.

Viktor Khristenko: Yes, that is our ceiling index. 15,000 soft car loans have been made for today. The resolutions you have signed proceed from the current situation, from public demand for loans, and from the most promising form of loans.

So we expect major shifts, and think that 120,000 cars will be purchased on soft loans before the year ends.

As for leasing subsidies, the decisions made at the end of last year aimed at a proper form of promoting leases, which promised to retain 30-40% of commercial public transport. However, the crisis has all but obliterated this market sector. The decisions made then envisaged, in particular, increasing authorised capital through many agencies.

The decision made for today emerged in a discussion that involved all, including car manufacturers. The Government has earmarked a billion roubles to sudsidise leases at 2/3 of the Central Bank refinancing rate. According to our estimates, leasing will involve vehicles to total 13-14 billion roubles, with an emphasis on lorries and light commercial vehicles.

Vladimir Putin: So leases will also involve vehicles manufactured by Russian-based plants with 100% foreign capital or whose expat holders possess the control block.

Viktor Khristenko: Yes, the change of terms and the ceiling raised to 600,000 roubles will extend the list from long-established Russian makes to vehicles made by foreign-held Russian plants to offer new opportunities to established and emergent Russian manufacturers.

Vladimir Putin: An executive order on increasing Russian Railways' registered capital was also signed. That will be used to purchase carriages, construction of an alternative route in the Perm Region, and to subsidise train fares for schoolchildren and students.

Alexander Zhukov: Yes, Mr Putin, the registered capital of Russian Railways has been increased by 11.3 billion roubles. Of this, 3 billion will go towards the purchase of passenger carriages from the Tver Wagon Building Plant in accordance with the decisions you made on April 15. This money is ring-fenced in the budget. Accordingly, this amounts to significant support for our national producers.

Six billion roubles will be spent on the construction of a 53km railway line. This reinstates the link between Perm and Solikamsk. In the future these budgetary funds will be reimbursed by the companies Uralkaly and Silvinit.

And 2.3 billion roubles will go to compensate Russian Railways for their loss of income in connection with the introduction of reduced fares in 2009 for train travel for school children and students. This is the 50% deal, which Russian Railways has financed and which we are now going to reimburse them from the budget.

Vladimir Putin: Good. And what is happening in terms of carrying out the decisions on developing the Murmansk transport link?

Igor Levitin: Mr Putin, in accordance with your instruction we have begun designing a new sea port on the west bank of the Kola Bay. I would like to say that we have agreed the sea port's boundaries with the Ministry of Defence. And overall, in the six months of this year the Murmansk port increased its cargo transfer capacity by 10% compared to 2008.

Vladimir Putin: By how much?

Igor Levitin: By 10%. And the port has virtually exhausted its capacity. In connection with the expanding construction of infrastructure associated with the Shtokman gas deposit and other businesses, it has virtually exhausted its capacity. We have started designing the new sea port, and next year, together with the investors, we would like to begin building it. The designs will be finished this year.

Vladimir Putin: According to the resolution we have made provisions for work on the ground there.

Igor Levitin: On allocating the land...

Vladimir Putin: On allocation, on land retirement.

Igor Levitin: As it happens the plans set out areas of territorial development, where the federal and regional infrastructure will be located, and the structure that private companies will occupy.

The matter has been agreed with the Governor of the Murmansk Region. Currently land is not being sold there, it is being reserved to accommodate the infrastructure. This includes a new railway line and areas under development for coal and oil terminals.

Vladimir Putin: Fine. From January 1 we have index-linked the financial compensation for the Chernobyl veterans at 8.5%. But inflation is higher than planned, and so we should carry out another readjustment. Today I signed the corresponding document. This decision will affect all citizens, who have the right to these payments, from January 1, 2009. People will get this money backdated. Please, say a couple of words about this.

Tatiana Golikova: Mr Putin, in accordance with the current acting legislation we must index-link social payments received by those people who have suffered as a result of the Chernobyl catastrophe and related disasters, from January 1in accordance with the forecast level of inflation, which is incorporated into the draft budget for the appropriate fiscal year.

Indeed from January 1we index-linked these payments at 8.5% as accounted for in the budget. In April when we reviewed the macroeconomic factors, including inflation, we duly reviewed the parameters of all kinds of social payments which were part of this budget. This includes another category of payment, payment for harm incurred, which as you correctly noted will be index-linked at 13% and backdated.

The indicated increase affects 1.7 million citizens who fall into this category. Additional expenses here amount to 623.7 million roubles which have already been set aside and which are now ring-fenced in the budget.

The average increase, depending on the benefit category, is valued at between 90 to 1,000 roubles per month. Now in connection with the fact that you have signed this document, we will begin to recalculate and, beginning from the next payment, citizens will be able to receive compensation not paid in full from January to July.

Vladimir Putin: Good, thank you.

Now a few words about the agenda. First of all, I would like to focus on the questions relating to the implementation of the law on protecting the rights of legal entities. It is designed to dispense with superfluous administrative barriers, primarily for small and medium-sized businesses.

Remember, we have already taken decisions on the introduction of notification orders for starting new businesses. This refers to areas of activity in demand, such as: trade, consumer services, public catering, hotels, road transportation, tailoring, shoe making, publishing and other areas.

Now a businessman, having decided to start his own business, such as opening a shop or a warehouse, only has to send notification to the appropriate agency, and also providing information regarding his willingness to comply with the relevant requirements for that kind of business.

No additional permissions, agreements, verification acts or similar official documents are necessary. Moreover, the authorities are forbidden to ask businessmen for such documents.

A number of technical questions must be resolved for this law to work. They relate to confirming the kinds of notifications required and the form of their submission.

But what is significantly more important, is making sure that in practice these administrative norms are unconditionally abided by at all levels of power. I ask the Ministry of Economic Development to act jointly with supervisory agencies and business associations to monitor the situation on a permanent basis.

Today we will also consider several draft laws that the Government plans to introduce to Parliament.

Firstly, these are amendments that reduce the registration time for mortgages on buildings and plots of land from one month to 15 working days, that is halving it. And the registration period will be even shorter for mortgages taken on residential accommodation - no longer than five working days.

So we are lowering the charges people pay on concluding deals on the property market, broadly strengthening the legislative base for mortgage institutions, and in addition, I hope, eliminating the significant margin for corruption. I have in mind the numerous "offices" which today make money by speeding up the registration of property rights.

The second draft law is directly linked with effective use of our natural resources wealth.

Today we will consider the proposals on the introduction of tariff preferences for power plants working on associated gas.

Let's get to work.