The President of Russia Vladimir Putin had a working meeting with the Head of FAS Igor Artemiev
Vladimir Putin: Mr. Artemiev, what are the good things that happened in your field after unification with the Federal Tariff Service; how do you evaluate this “merger” and are there any actual practical results of this fusion?
Igor Artemiev: Mr. President, thank you very much for an opportunity to meet up.
It is too early to talk about any big success. We are more concerned about not disrupting the schedule and timely tariff-setting – and we have managed it.
We began to analyze some aspects of stimulating companies, for instance, natural monopolies. The effect that we’ve generated can be called a pretty serious synergy effect.
Analyzing any natural monopolies, we used to look at purely antimonopoly factors - whether they do not exceed the price or something else. As a tariff body today we look: how much are the costs of bricks in an investment programme, compare it with the prices on the market to find out if the company overpays or buys electric power through intermediaries, or how procurement is organized, how many auctions, at what prices contractors are really hired.
So we now look at a company in an integrated manner and try to get an insight of its economy and understand how it lives: fully, from all aspects. And when we see it, we already must say: “Dear colleagues, your tariffs should go down, you should adopt a cost-reduction programme – operational, investment – especially now, when the situation requires such efforts”.
Mr. President, I would like to touch an issue of big incentives in the economy. It seems to me that regarding our monopolies (we often criticize them, and FAS probably more often than anybody) we unfortunately have not been able to create an incentive for those companies to save on costs.
Today they gain their profit from guaranteed earnings; the profit is calculated based on spent funds. It means that the more they spend – “take more, throw farther” - the more the profit will be, which they can then spend as they wish.
We believe it is necessary to think seriously on turning the pyramid to a completely different direction. If apart from the profit, allocated in small quantities under the old traditional principles, we can allocate the major profit directly from the sum that they saved and learn to calculate it, then certainly the reserves of our monopolies, such as “Gazprom”, “Russian Railways”… We discussed the issue with Mr. Belozerov [the President of “Russian Railways”] and there is an understanding how it can be done.
We certainly would like to bring it to your attention, working on it carefully with the Government, this very serious reform that we attempted to undertake through the RAB system (Regulatory Asset Base). It appeared that RAB did not generate any incentive and resulted only in increased tariffs; we estimated that things will be more expensive but better, and it became more expensive but did not become better.
These are the mistakes made, which must be analyzed. It seems to me that we can reach very good results if in the coming years if we set long tariffs for the companies to save on costs.
Vladimir Putin: Discuss it with colleagues from the Government, and form proposals. All right?
Igor Artemiev: We’ll do it.
I wanted to discuss an issue that appears to be external but in reality directly concerns the practices pursued in Russia by transnational corporations.
At the Legal Forum in St Petersburg we signed a historic document with the BRICS countries - China, India, South Africa and Brazil, according to which we will be conducting joint investigations of the best and worst practices of huge transnational corporations operating in our territories. The thing is that all our five countries give nearly 50 % of all consumption of any products and any services.
When we, for instance, attempt, like the Federal Antimonopoly Service, get things to at least some control with Big Pharma on medicinal drugs, – fight against them, but with varied success, and the winner is unknown. At what price do we purchase drugs today – at high price, undoubtedly, and the monopoly is unrestricted in spite of all that FAS, the Ministry of Health Care and all others do.
And we agreed that five BRICS countries will sit together and say: “At home you behave in line with such and such European Directive. In a year you must behave exactly the same in our five countries. These are bad practices, and these are good practices. If you continue bad practices in all our five countries, we will simultaneously start investigations in all our countries and we will deal with you”.
We agreed that now we look into the Big Pharma market, the car manufacturing market, an important for us, and the food products market. When we started analyzing the food products market we were terrified to see that the market of seeds and other biological materials for reproducing new generations of plants and animals is monopolized by three companies all over the entire world and these three companies dictate to everybody, including Russia, India and other countries. China bought out one of these companies for an incredible price to retain some possibilities in this field.
We would like to employ this synergy in our joint work, having such meetings and summits practically every year, inviting these corporations and explaining to them that in fact Russia is a country with good education and we are capable of discerning good from bad.