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2008 May 7   10:02

Russian minister comments on higher rail, electricity charges

Rises in railway freighting charges and electricity  prices  to  be  in  effect  from  2008  under  new  Russian government   regulations,   will   undercut   the   profits  of  Russian enterprises,  Economic  Development and Trade Minister Elvira Nabiullina said according to Interfax.

Revised  natural  monopoly tariffs approved at a government meeting on Tuesday,  mean  electricity  prices  in  both  the regulated and free markets  will  rise  by  averages  of 16.7% in 2008, 26% in 2009, 22% in 2010, and 18% in 2011.

The meeting also raised rail freighting charges 8% with effect from July 1.  This means freighting charges will go up by an average of 16.3% for 2008.  Railway  transportation  is  carried  out by monopoly company Russian Railways (RTS: RZHD).

Higher  electricity  prices  would  deal their heaviest blow to the production  of  aluminum,  to  manufacturing  -  to  sectors such as the chemical  industry  and  production  of  ferroalloys and cement - and to poultry farming, Nabiullina said in a report to Tuesday's meeting.

The  increased  railway charges would have their heaviest impact on sectors  such as coal and ore mining, the timber industry, construction, and the chemical industry.

However, all industries would be affected, the Economic Development and Trade Ministry argued.

In  low  profitability sectors such as woodworking, agriculture and the chemical  industry, 2011 profit rates would be 0.7 percentage points down on 2007.

High profitability sectors such as production of coke, nonmetal and mineral  goods and the steel industry would show a respective decline of 0.8 percentage points for this period.

At  the  same  time,  the  higher  charges  would become a powerful energy-saving stimulus, the ministry argues.

Energy  consumption  will drop by between 40% and 45%, the ministry forecasts. The energy industry might account for 30% and the housing and public utilities sector for 25% of saved energy, it says.

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