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Government’s attempts to curb housing tariff growth might aggravate sectoral problems

March 04, 2013, 16:12 UTC+3 Alexandrova Lyudmila

The condition of Russia’s housing and utilities sector and the growing housing and utilities tariffs is a real pain in the neck for Russians, and hence, for the authorities as well, which are trying to do something to ease people’s growing discontent endangering stability in the country. A recent upward jump in utilities and housing tariffs dominated protest slogans at the beginning of 2013. The situation even required the Kremlin’s intervention. But the problem has not been solved in principle, experts warn.

Socio-political stability in Russian regions is reducing, according to the Petersburg Policy Fund, which published its fifth stability rating on Monday. A key reason for that is an upsurge in housing and utilities tariffs, experts say.

Most active protests against growing fees were reported from the Altai Territory, the Murmansk, Novosibirsk, and Penza regions.

As follows from a recent survey of the condition of the housing and utilities sector in 164 Russian cities made by the Russian Union of Engineers, about 11 percent of houses in Russian cities have no centralized water supplies systems, no hot water is supplied to 20 percent of apartments, as many as 12 percent of apartments have no sewage systems, and eight percent of flats have no central heating systems. More than 30 percent of houses in Russian cities are not hooked up to gas mains. These figures have stayed practically the same for the past decade, while utilities networks have worn out up to 70 percent.

The study of the condition of the utilities infrastructure in Russian regions and housing conditions of the people is the domain of the Russian State Statistics Agency. Thus, according to the Comprehensive Survey of the Life of Russians, as of January 1, 2012, a total of 29.2 million people lived in houses lacking water supplies systems. As many as 34.9 million people lived in houses without sewage systems, 22.2 million had no central heating and 47.1 million – no hot water supplies. In terms of availability of housing utilities and amenities, the Republic of Altai is Russia’s anti-leader, with a mere 13.2 percent of houses boasting such advances of civilization.

Several days ago, the All-Russia Public Opinion Centre (VCIOM) announced the results of a poll about the most sensitive problems facing the Russians. Thus, it appeared that the bulk of Russians (55 percent) are concerned about the situation in the housing and utilities sector.

The authorities cannot turn a blind eye to the problem any longer. Thus, at a government meeting dedicated to the problems of the housing sector a week ago, President Vladimir Putin voiced severe criticism about the skyrocketing growth of utilities and housing fees in a number of Russian regions, including the Murmansk region and the republic of Altai, where such fees soared by up to 225 percent. In some districts of St. Petersburg, Russia’s second largest city, utilities fees jumped by 40 percent overnight. Putin said such growth was absolutely unjustified. He said those who had sanctioned such fee jumps “were out of their senses.”

“Go and tell people why they paid one sum in November and December and now have to pay that much in January and February,” Putin told government officials.

The head of state was utterly indignant to hear that people in 2,500 municipalities in 49 Russian regions had to face a sharp rise of housing fees at the very beginning of the year. He ordered the government to bring down the housing and utilities fees where such services were unreasonably overpriced. The money people have already overpaid, in his words, must be either paid back or be credited towards future payments.

The president gave the government one week to set an upper limit of the housing tariff growth, which must not go beyond six percent a year across the country.

Nonetheless, experts note that all housing and utilities fees are to go up by at least ten percent from July 1, 2013. Gas fees are to go up even more – by 15 percent, so the sum total due to be paid will go up likewise.

The president’s sharp criticism was followed by a series of resignations. Thus, the Murmansk region minister of energy and the housing sector, Gennady Mikichura, was sent to resignation shortly after. Another municipal government official, Sergei Kozyrev, a vice governor of St. Petersburg in charge of the housing and utilities sector, filed a resignation. Yuri Sorokin, the regional development minister of the republic of Altai, also had to vacate his post.

Following Putin’s critical remarks, Sergei Novikov, the director of Russia’s Federal Tariff Service, suggested that a provision limiting the growth of the ultimate payment sum should be re-entered into the relevant law (before the year 2012, the law on tariff formation fixed an upper limit for tariff growth at 10-15 percent). Putin, in turn, demanded that it must be done as soon as possible.

As a matter of fact, however nothing is being done to solve the problems facing the housing and utilities sector. These problems may grow even worse when the tariff growth is held back, experts say. The electricity tariff is evenly divided between generating companies, grids and sellers and the current 10-15 percent tariff is not enough for generating and grid companies to make up their expenses on investment programs, let alone six percent.

The condition of heat generating companies (up to 60 percent of the bill for utilities services) arouses most serious concern, if the growth rate of utilities tariffs is to be curtailed. Already today, the bulk of such companies are working with zero profit or even below cost. If tariff growth is ultimately limited, these companies will completely lose whatever attractiveness to potential investors, which, in the long run, is fraught with a problem of heat mains wear, says Vladimir Sklyar, an electricity sector analyst of Renaissance Capital Co.

“If it comes that way, an investment hunger threatens the industry,” warns Dmitry Gordeyev, a lawyer from the Institute of the Urban Economy. “We must not be afraid of a possible tariff growth, but what we must do is to make the sector more transparent and see to it that social assistance come exactly to those who need it.”


MOSCOW, March 4