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Russia to freeze gas, power, railway tariffs in 2014
September 11, 2013 / 9:00 PM / 4 years ago

Russia to freeze gas, power, railway tariffs in 2014

MOSCOW (Reuters) - Russia will freeze tariffs on state-regulated services including gas, electricity and railways in 2014, Economy Minister Alexei Ulyukayev said on Wednesday after a budget meeting with President Vladimir Putin.

The decision to prevent regulated prices from rising for the first time since 1999 is a effort to ease pressure on household budgets and foster growth in an economy slowed by financial trouble in Europe and deep dependence on energy revenue.

The idea of a tariff freeze drove shares in natural gas monopoly Gazprom (GAZP.MM) down and drew criticism from the energy minister and railways chief when Prime Minister Dmitry Medvedev ordered the government to look into last week.

But hopes that consumers with a bit more pocket money could spur growth - and thank the government - appear to have trumped concerns about falling revenue at monopolies such as Gazprom, despite the cash it brings state coffers, and Russian Railways.

“The prognosis that the economy ministry submitted, on the basis of the new tariff policy among other things, was supported by the president,” Ulyukayev told reporters after a budget meeting that ended late in the evening.

He said railway tariffs would not be raised until January 2015, and then at the level of 2014 inflation. Gas and electricity rates, normally raised in July, would not be raised until July 2015 - also at the level of 2014 inflation.

In a directive published on Friday, Medvedev had told ministries to draw up a new economic development forecast for 2014-2016 that incorporated maintaining tariffs at their 2013 levels, a move the directive said was “being considered”.

Bank of America Merrill Lynch estimated that a tariff freeze would trim around one percentage point off inflation next year.

Opinion polls show Russians are concerned about prices, particularly of household bills, and Putin may feel under pressure to breath new life into the economy during a six-year third term he started in 2012 after a wave of street protests.

In August, the economy ministry cut its 2013 growth forecast for the second time this year, to 1.8 from 2.4 percent, and cut the 2014 outlook to 2.8-3.2 percent from 3.7 percent. Ulyukayev forecast 2014 growth of 3 percent based on the new plan.

Reporting by Darya Korsunskaya; writing by Steve Gutterman; editing by Andrew Roche

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