"Can be shared"

Gas revenues attract the Ministry of Finance

The Ministry of Finance does not give up hope of adding a share of the growing profits of gas companies to the budget . As deputy head of the ministry Sergei Shatalov said at a press conference yesterday, companies could receive up to 25 billion rubles by increasing gas prices. “We believe that this amount can be shared,” said the deputy minister. True, according to him, currently the proposals of the Ministry of Finance do not contain any specific figures. “We believe that before April it is possible to calculate the possible consequences and assess all financial circumstances,” he concluded.

As you know, on November 30, 2006, the government fixed the rate of growth in gas prices for industrial enterprises in Russia, reaching a level of equal profitability with Gazprom’s export sales. So, last year the growth was 15%, from January 1, 2008, regulated prices were indexed by another 25%, next year two increases of 13% are planned (at the beginning and middle of the year), as in 2010. From 2011, gas (unless the concept suddenly changes) will be sold at prices identical to European ones, minus transport costs and customs duties.

Last year, Finance Minister Alexei Kudrin, in collaboration with the then head of the Ministry of Economic Development and Trade, German Gref, proposed that the government raise the tax rate on mineral extraction in the gas industry. And he drew up a schedule for increasing the mineral extraction tax from the current 147 rubles. from every thousand cubic meters up to 735 rubles. by 2011 (when, according to the White House decision, domestic gas prices in Russia should reach a level of equal profitability with export prices in Western Europe). However, the initiative failed. Under pressure from Gazprom, the Cabinet of Ministers refused to revise the mineral extraction tax rate and instructed the Ministry of Economic Development to prepare proposals on this topic in the first quarter of 2008.

According to Vremya Novostei, at the end of last year the Ministry of Economic Development and Trade even assembled a working group once, but that was all. No meaningful proposals have yet emerged within the group.

Gazprom continues to categorically oppose a significant increase in the mineral extraction tax. According to a source in the concern, it is not advisable to change the base tax rate before 2011, but it can be indexed to inflation. And in the future, says Vremya Novostey’s interlocutor, “it is important to make the mineral extraction tax rate differentiated, so that the decision on the amount of the tax is made taking into account the commissioning of new gas reserves with a higher production cost.”

The Ministry of Finance, which has always been skeptical about tax differentiation (rightly believing that the level of administration suffers from this), yesterday publicly agreed with Gazprom’s arguments in this regard. Mr. Shatalov, in particular, noted that simultaneously with the rate increase, it will be necessary to take into account the reduction in capacity at old gas fields and the need to develop new fields. “This problem will have to be solved comprehensively,” said the deputy minister, citing as an example the differentiation system adopted in the oil industry.

Alexey GRIVACHS