Reform of Russia's power industry requires consensus

Reforming Russia's power industry calls for a consensus between the government, deputies, and regions. This statement made by Prime Minister Mikhail Kasyanov at a conference, "Russia: Sustainable Development", on Monday, at once became hot news.

Properly speaking, the government has followed the compromise path before. A package of six bills, devoted to reform of the power industry which it approved in the spring of this year and right away sent to the State Duma, had been discussed all summer in a three-way commission consisting of representatives of the cabinet of ministers and both houses of the Federal Assembly. As a result, the sides produced an updated version which has already been approved by the Duma committee on industry, construction, transport and power.

Now the cabinet is to push the package of bills through at a minimum three votes in the Duma and one in the Federation Council before it reaches the president's desk. Kasyanov's statement on the need for a consensus indicates that the government is ready to consider any remarks by deputies with the exception of those that will call in question the basic idea of the reform -- dividing the power monopoly into a competitive component slated for privatisation and an infrastructure one that is to remain in the state's ownership.

The main thing for the government is to keep the principal accent on the economic aspect of the reform by avoiding political problems.

Bias towards politics, however, is not ruled out. While over the past two and a half years the main economic initiatives of the government, such as proposals on tax reforms, budget, etc., have won guaranteed support in the State Duma from the centrist majority, in the present case the main snag will be the fact that representatives of this majority often voice directly opposite views on the reform of the power industry. So if one reneges on a search for the consensus and tries to act in a more blunt way, then the government's centrist anchor in the State Duma may fail to hold. And that, considering that claims from representatives of the regions in the Federation Council are no less serious than of State Duma deputies', is fraught with complications for relations between the government and the Federal Assembly as a whole.

It is hardly advisable, ahead of a year complicated in budget terms and with a peak of payments on the external debt, for the government to choose to aggravate relations with parliament. After all, political stability and a high degree of mutual understanding between the branches of government has been one of its best assets which it is unlikely to shake off.

This means that despite strong pressure and arguments of reform supporters from UES and the Economic Development and Trade Ministry the government as a whole will seek to work out a sort of in-between version suiting all participants in the legislative process.

The most radical approach, articulated in parliament, has until recently been a simple question: is it worthwhile reforming the successfully operating industry? The answer the government and UES have given has been invariable so far -- it is, because it will make the branch more attractive to investors. If nothing is done to start attracting resources for its development now, in two to three years' time power enterprises may run into a serious crisis because of the breakdown of existing capacities. Results of the summer's work of the conciliation commission show that the odds were in the government's favour.

Another general question over which parliamentarians and regional representatives differ with the cabinet is the priority, at least initially, of consumer interests over market requirements. Judging from Kasyanov's remarks, the government will not dispute about it yet. A free market of electric power and gas, he said, may appear in Russia in the next five years. But in the interim, the premier believes, tariffs on services of the natural monopolies must be controlled by the state.

Raising tariffs at the expense of industry and population, according to Kasyanov, is unacceptable. Initially, generating enterprises should show how they reduce their own expenses, and only then perhaps it may be decided to change the tariffs.

Besides, Kasyanov made an assurance that the state is not going to reduce its share in the natural monopolies until the process of their restructuring is complete, that is, the process of reforming will proceed under state control.

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