The following issues are scheduled for discussion at the November 5, 2009 Meeting of the Presidium of the Government of the Russian Federation:

1. Implementation of a set of measures to enhance the internal effectiveness of natural monopolies and cut energy costs.

The Ministry of Energy of the Russian Federation is developing and implementing measures to enhance the internal effectiveness of natural monopolies and cut energy costs in accordance with the Plan of Actions to Implement the Programme of Anti-Crisis Measures of the Government of the Russian Federation in the Energy Sector in 2009.

In seeking to enhance the internal effectiveness of holders of the natural monopolies, the Ministry of Energy of Russia proceeds from the following principles:

• the effectiveness of natural monopolies' holders for the state and consumers is measured in terms of the quality, reliability, safety and accessibility of their services at optimal costs;
• the electric-power industry's energy efficiency is determined primarily by the losses of power in the electrical and central heating networks, the consumption of fuel per unit of electrical and thermal energy produced and the consumption of energy for internal needs.

The discussion concerned the natural monopolies OAO FSK UES, OAO Holding MRSK, OAO SO UES, OAO RAO Energy Systems of the East, OAO Transneft and OAO Gazprom, as well as OAO INTER RAO UES and OAO Energoatom Concern, which are not natural monopolies. To make the above companies more effective, measures are needed to optimise costs, increase the volume and improve the quality of services delivered, and government measures to improve the government regulation of natural monopolies and upgrade corporate governance are also necessary.

Currently, the main method for improving energy efficiency is cost-cutting. Cost management programmes are adopted by energy companies as part of business plans for each year.

As a result of the performance over 9 months of 2009, the total effect of cost-cutting (in companies with a government stake) by OAO Holding MRSK, OAO SO UES, OAO RAO Energy Systems of the East, OAO RusHydro, OAO INTER RAO UES, OAO FSK UES, OAO Energoatom Concern, OAO AK Transneft and OAO Gazprom amounted to 30.644 billion roubles. The main means of cost-cutting include:

• reducing the cost of repairs and the wage bill by optimising the number of personnel, reducing general costs (OAO FSK UES);
• cutting energy losses in networks, the cost of production services, raw and other materials and repair (OAO Holding MRSK);
• regulating procurement (the holding of competitive procedures, procurement under centralized contracts, switching to domestic suppliers of equipment and materials), reducing operational costs (OAO SO UES);
• cutting the costs of production and marketing of goods (services), as well as non-commercial activities (OAO RAO Energy Systems of the East);
• cutting the costs of raw and other materials, the wage bill, the cost of production and non-production services (OAO RusHydro);
• optimising the export and import of electrical energy, cutting internal and managerial costs, saving on currency transactions and expenditure related to attracting loans (OAO Inter RAO UES);
• applying new technologies and materials to increase the intervals between repairs, forming an integrated system for managing the procurement of production services, cutting administrative and managerial costs, payments for environmental pollution, transportation costs, self-financing of auxiliary production facilities (OAO Energoatom Concern);
• cutting management costs, the cost of liquidation and mothballing of basic assets, the cost of start-up and fine-tuning, contributions to the property of subsidiaries (OAO Gazprom);
• saving on investment (reduction of the cost of building and assembly work, research and development) and management costs, etc. (OAO AK Transneft).

To further increase effectiveness and cut costs, the Energy Ministry proposes developing programmes for managing energy company costs to curb the growth of electricity rates for end-users in 2009 and 2010 and find internal sources of investment by cost-cutting.

Pursuant to the instructions of the Government of the Russian Federation, the Energy Ministry of Russia is developing a comprehensive programme of measures to reduce unauthorized losses of energy in 2010-2012 in the constituent entities of the Russian Federation which are part of the Southern Federal District.

Considering the measures being taken to cut costs by 10%, the target for the growth of regulated electricity tariffs for 2010 has been set at 8% (assuming wages remain at the 2009 level).

The costs for network companies (OAO FSK UES, OAO Holding MRSK and OAO Far Eastern Distribution Company) are also to be cut by regulating the tariffs for power transmission services using the method of invested capital profit yield.

The Energy Ministry of Russia, together with the Federal Customs Service of Russia and the Federal Anti-Monopoly Service of Russia, is creating a system for monitoring and forecasting the value and cost of energy generation. To this end, an integrated data base on certain key costs - for fuel and repair - is being created. The data for the previous period (month, quarter, year) is being analyzed.

The Energy Ministry of Russia proposes additional measures to increase the internal effectiveness and cut costs in the power industry, intended to create rules for the implementation of work to cut costs in the energy sector, develop a system of technical and economic indicators for network and generating companies, a programme of measures to cut capital investment per unit in the building of networks and generating facilities, a programme for cutting power losses in the grids of all voltages, a programme for cutting fuel consumption per unit in the generation of electricity and heating at thermal power plants, a set of measures to improve the measurement of losses of heat energy in the networks, as well as criteria and indicators of safety, reliability and the quality of network services, with the use of technical regulations.

The Energy Ministry of Russia also proposes to introduce in natural monopolies a system of procurement on the basis of fixed competitive procedures that take into account the specific nature of the natural monopolies.

The Energy Ministry of Russia proposes to include the above measures in the programme for enhancing the effectiveness of natural monopolies and cutting energy costs in 2010-2012 which is currently being developed.

2. Implementation in 2009 of a range of measures to promote the development of sectors with the most import-replacement potential.

The materials on the above issue have been submitted by the Industry and Trade Ministry of Russia. They constitute a report of the Ministry on the work done to overcome the crisis in four sectors which, in the Ministry's opinion, have the most import replacement potential: car-making, timber and light industries, as well as the pharmaceutical industry.

The Government of the Russian Federation, seeking to modernise industrial production, particularly in the timber and light industries, made a number of decisions in 2007-2009 aimed at cutting the export of raw materials and stimulating import replacement:

• customs duties on imported equipment to which no analogues are produced in the Russian Federation have been canceled or drastically cut;
• a decision has been made to exempt imported equipment to which analogues are not produced in Russia from value-added tax;
• a schedule has been designed for the gradual increase of export customs duties on raw timber;
• export duties have been abolished on wood-working and pulp and paper industry products (excluding valuable timber) to ensure the free access of such goods to the external market;
• the Government of the Russian Federation has adopted the resolution On Priority Investment Projects in the Field of Forest Development and the Industry and Trade Ministry of Russia has passed supporting documents on its implementation aimed at creating production capacities  for the deep processing of timber, and the output of products that Russia either does not produce enough of or does not produce at all. Currently, 75 forestry development projects have been included in the list of priority projects;

free subsidies are made available from the Federal Budget to forestry organizations to compensate for part of the cost of interest on loans obtained from Russian lending institutions for modernisation for a term of up to 5 years. The limit of budgetary commitments for these purposes in 2009 is 1.0 billion roubles;

• free subsidies are made available from the Federal Budget to the light industry to compensate for part of the cost of interest on loans obtained from Russian lending institutions for the purpose of modernisation in 2009 (98 million roubles have been earmarked for the purpose). Modernisation subsidies amount to two-thirds of the refinancing rate of the Central Bank of the Russian Federation. The term of modernisation loans has been extended to 5 years;
• the subsidies also cover the loans obtained in 2006-2008;
• subsidies are also provided for the current activities of enterprises to compensate for part of the cost of interest on loans obtained from Russian lending institutions for the creation of buffer stocks of raw materials and fuel between seasons. The limit of budgetary commitments for these purposes for 2009 is 325 m roubles for forestry organizations and 200 m roubles for light industry organizations.

The Industry and Trade Ministry of Russia believes that regulatory acts passed in 2007-2009 are sufficient to enable the forestry and light industries to build up import-substituting production as part of internal demand, and that it is not necessary to develop new regulations in 2010.

As a result of completed work on the strategy for the development of the pharmaceutical industry with an eye to import replacement, the Strategy for the Development of the Pharmaceutical Industry in the Russian Federation until 2020 was approved on October 23, 2009, and the Register of promising projects in the pharmaceutical and medical industries of the Industry and Trade Ministry has also been approved. More than 150 projects have been submitted, 30 of which have already been included in the Register, with import replacement projects among them.

3. Draft Federal Law on the ratification of the agreement on the rules for licensing in the sphere of foreign trade in goods

The draft federal law has been developed and submitted jointly by the Foreign Affairs Ministry of Russia and the Industry and Trade Ministry of Russia.

The agreement on the rules for licensing in the sphere of foreign trade in goods was signed as part of a regular meeting of the Interstate Council of the Eurasian Economic Community at the level of the heads of government held in Moscow on June 9, 2009.

The agreement lays out the procedure for issuing licenses and permits for the export and (or) import of goods included in the consolidated list of goods subject to bans or restrictions for import or export by the member states of the Customs Union in the framework of the Eurasian Economic Community in trade with third countries.

Pursuant to subclause A, Clause 1, Article 15 of the Federal Law On International Treaties of the Russian Federation, the draft law is subject to ratification.

4. Draft Federal Law on the ratification of the agreement on the procedure for the introduction and enforcement of measures concerning foreign trade in goods in the common customs territory with regard to third countries.

The draft federal law has been developed and submitted jointly by the Foreign Affairs Ministry of Russia and the Industry and Trade Ministry of Russia.

The agreement on the procedure for the introduction and enforcement of measures pertaining to foreign trade in goods on the common customs territory with regard to third countries was signed in Moscow on June 9, 2009 as part of a meeting of the Interstate Council of the Eurasian  Economic Community at the level of heads of Government.

The agreement spells out the procedure for issuing licenses and permits for the export and (or) import of goods included in the consolidated list of goods subject to bans or restrictions for import and export by the member states of the Customs Union in the framework of the Eurasian Economic Community in trade with third countries.

Pursuant to subclause A, Clause 1, Article 15 of Federal Law No.101-FZ of July 15, 1995 on international treaties of the Russian Federation, the draft law is subject to ratification.

The agreement contains provisions that would transfer to the Customs Union Commission certain powers of the Russian Federation currently exercised by the Government of the Russian Federation. These include the introduction, application and repeal of non-tariff regulatory measures, distribution of export and (or) import quotas between the states in introducing quantitative restrictions on the import and (or) export of goods, determination of the methods for their distribution, as well as the adoption of decisions and specification of the procedure for granting exclusive rights to export and (or) import certain types of goods, imposing supervision over the export and (or) import of certain types of goods, adoption of decisions to introduce any other measures that affect foreign trade in non-economic goods introduced in accordance with the national interests of the member states, as well as special bans and restrictions on foreign trade in goods.

5. Introducing amendments to the Statute on the Ministry of Sport, Tourism and Youth Policy of the Russian Federation

The draft decree of the Government of the Russian Federation on the issue has been developed and submitted to the Government of the Russian Federation by the Ministry of Sport and Tourism of Russia.

In accordance with part 4, Article 23 of the Federal Law On Physical Culture and Sports in the Russian Federation, the procedure for financing from the Federal Budget and the quotas for spending on physical culture and sports activities included in the Consolidated Calendar of interregional, all-Russia and international physical culture and sports events is established by the federal executive body authorized by the Government of the Russian Federation. Previously, such procedure and expenditure quotas were set by the Government of the Russian Federation.

Since the Ministry of Sport, Tourism and Youth Policy is the federal executive body in charge of the development and implementation of the state policy and legal regulation in the sphere of physical culture, sport, tourism and youth policy under the Statute on the Ministry of Sport, Tourism and Youth Policy of the Russian Federation approved by the Russian Government's Resolution No.408 of May 29, 2008, it is practicable to authorise the Ministry of Sport, Tourism and Youth Policy of Russia to establish the above-mentioned procedure and norms.

6. Allocation to the administration of the Sakhalin Region of money from the Reserve Fund of the Government of the Russian Federation for the Prevention and Clearing of the Aftermath of Emergency Situations and Natural Disasters to deliver financial assistance to the victims of the earthquake which occurred in the Nevelsk District, Sakhalin Region on August 2, 2007, in view of their loss of essential property.

Moscow,

November 3, 2009

* The press-releases  from the Department of Press Service and Information contain materials submitted by the executive federal bodies for discussion by the Presidium of the Government of the Russian Federation