Friends, our efforts to increase municipal revenue, improve land relations and create new jobs are aimed at achieving a major goal, which is to make rural areas attractive and comfortable to live in.

Over the past eight years, we have allocated over 40 billion roubles from the federal budget for the targeted federal programme, the Social Development of Rural Areas. Another 190 billion roubles have gone to rural areas from regional budgets and extrabudgetary sources. These funds have been used to improve housing conditions, including for young families and young professionals, to build gas and water supply lines, and to build general education facilities. We used these funds to build over 14 million square metres of housing and provide gas and water to over half of rural households. We have also improved electricity supply and expanded telephone services. To be sure, this is not sufficient, and there’s still much to be done. This year we will allocate another 26 billion roubles for these purposes, of which 8 billion will come from the federal budget. We have plans to build or acquire 915,000 square metres of housing in rural areas, including 510,000 square metres  for young families and young professionals.

The decision was taken to extend the federal targeted programme, the Social Development of Rural Areas, until 2013. Work has also begun on a concept for a new federal targeted programme that will define the main areas of further improvements in the social, engineering and utilities infrastructure in rural areas until 2020. This far from everything we plan to invest in rural development.

As you know, we will pursue a series of health care modernisation efforts in the Russian regions this and next year. We will allocate 460 billion roubles from the federal budget to this end. These funds will be used to expand the network of primary care facilities, to repair hospitals, medical and obstetric centres, and general practitioners’ offices, as well as to buy modern diagnostic and treatment equipment.

Let me note also that next year we will begin transferring the authority for organising primary care from the municipal to the regional authorities. The healthcare buildings, facilities and other property will also be transferred. This is not a straightforward process, but let me tell you frankly that we have taken this decision  with the sole purpose of improving the quality of service. Please note that we are offering very flexible arrangements whereby the federal authorities can return the powers back to the municipalities. We should take a very balanced approach to these issues and take note of the specifics of each region.  Most importantly, we should remember that we are doing all this for the benefit of the people and act accordingly.  

Next. Any village or town will evolve and survive if it has a school. It’s a given, as we all know.  We should build basic education facilities and found branches of them in small rural developments. However, we should see to it that young people living in rural areas receive an education that is in no way inferior to the one that they receive in the cities. To this end, we have decided to allocate additional 120 billion roubles from the federal budget. We will begin the financing process right away. This year we will allocate 60 billion roubles and bring this number up to 120 billion in the coming years. These funds will be used to purchase equipment for school labs, gyms, medical facilities, and cafeterias. We will purchase enough workstations and establish broadband internet connection to let students participate in distance learning. Some schools have this already, some don’t, but we will get there. The point is not to shut down schools with low attendance, but instead to establish branches of major educational institutions so that rural children have access to quality education using distance learning opportunities. That way, the municipal and the regional authorities will cut expenses involved in maintaining such low-attendance schools.

We will stock school libraries with new books and buy the necessary vehicles. Then we will be able to ensure high living standards, including quality education and health care. We will connect rural town and villages with federal highways. Over 46,000 towns and villages don’t have hard-surface access roads. We have decided to allocate 5 billion roubles to build access roads from rural towns and villages to major highways. We will have allocated up to 7 billion roubles for these purposes by 2013. Certainly, we should take into account the specifics of such rural communities located in Siberia and the Far East, their growth dynamics and other factors. All of that should be considered during the allocation of funds. In other words, we should use a differentiated approach to each particular region. In addition, I think that local co-financing is another very important pre-requisite for the allocation of federal funds. We are discussing this issue with heads of regional administrations in an effort to make the regional contribution at least half of the entire amount.

I would like make a point to the regional authorities: you are about to receive a serious source of funding for building roads. I am talking about the regional road funds. I believe it would be fair if a major part of these funds goes to building rural roads. This would be a responsible and correct approach to regional development, all the more so as rural taxpayers make substantial contributions to road funds and are entitled to good roads just like the rest of Russia.

This calls for a revision of technical specifications regarding the construction of roads leading to businesses, farms and other rural facilities in order to cut the time and financial expenses, on the one hand, and to make rural roads more functional and suitable for agricultural equipment, on the other hand. All of that should be done in compliance with safety regulations.

A few words in conclusion. We live in a vast country with vast natural resources and outstanding human potential. The tempo of the nation’s development depends primarily on its citizens, their initiatives and desire to improve life in their village, town, district, city and country, as well as on the quality and effectiveness of local governments, which are directly involved in the people’s lives. Russia begins here, at this level.

Together, we will do all it takes to achieve our goals so that Russian people feel that they are being taken care of. Thank you for your time.

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Vladimir Putin’s comments on forum participants’ speeches

If I may, I’d like to make a few comments on your speeches.

These issues are very important. It is very good that we have the opportunity to meet you like this and to discuss such crucial issues. We must work together to find the best ways of resolving the difficult tasks that face the country, municipalities, regions and the federation as a whole.

Let’s start with the urgent issues. I’m grateful to those who raised them in their speeches. First of all, these are issues of tariffs, the development of the infrastructure, gas and electricity supplies, taxable income, one’s own sources and the revenues of municipal budgets. These issues were mentioned in every speech. They influence the development of the transport infrastructure, roads, and gas and electricity supplies, and so on and so forth. We must make difficult decisions. If I may, I’d like to sort through these issues one by one, as they were introduced.

First of all, there is the issue of the revenues of the municipal budgets. The speakers have made a number of serious proposals that may considerably change the current state of affairs. One of the proposals (made by the first speaker) is to levy taxes from infrastructure facilities – railways, gas pipelines, high-voltage transmission lines, etc. We have discussed this issue. Moreover, I was amazed that the Finance Ministry, which everyone so openly criticises, considers this solution worthwhile.

There is one more problem. It concerns the Defence Ministry’s facilities and lands that are exempt from taxes. They have to pay 0.3% from the cadastral value (we are now thinking about this). Exemptions may be lifted. We must analyse what facilities, including real estate, and lands are being used for their intended purposes. We must scrutinise everything. We must consider everything in a calm manner and start moving in this direction without any haste. I can tell you this straight away.

A few words about linear facilities, for instance gas pipelines. By the way, speaking about gas supply, in 2010 we commissioned 5,200 km of gas-distribution networks and supplied 57,800 houses with gas under the federal targeted programme “The Social Development of Rural Areas up to 2012”. In the past year up to 52.6% of houses in rural areas were connected to gas supplies as compared to 47% in 2009. This is a big step forward in one year on the national scale. Some regions maintained effective cooperation with Gazprom whereas others didn’t (I’m not going to list them here but we know them). In this context I’d like to say that Gazprom Mezhregiongaz (a division of Gazprom) only pays for the construction of gas pipelines linking residential areas. In other words, it brings gas to area, but the regional and local authorities are responsible for laying the street networks and for bringing gas to the end users. It often happens that Gazprom fulfils its part of the deal, while regional and local authorities stop at that for lack of resources. We won’t discuss the reasons here, but the simplest excuse is lack of money. This work requires coordination. It turns out that Gazprom has invested funds but they serve no purpose because they do not reach the final users. This work must be clearly coordinated with the regions and municipalities. This is the first point.

Now the second point that is very important. It is possible to zero out the increase of tariffs, but in this case Gazprom will stop building these networks. You will understand that it simply won’t  have the funds for this. Now we are resolving a very important and sensitive issue. I haven’t yet dared sign this resolution. I’m referring to the resolution on limiting the increase of tariffs of the so-called natural monopolies (Russian Railways, gas and electricity companies) to the growth of inflation next year. We think inflation will be around 5.5%-6.5%, but even this is a big deal for these large enterprises, the so-called infrastructure monopolies, because this will drastically restrict their development potential. Russian Railways, for one, will find it very difficult even to carry out simple repairs. We must calculate everything thoroughly here. I can tell you that adjusting the growth of their tariffs for inflation and increasing their tax burden is simply very dangerous for the country. We must adopt a very balanced approach to this issue and weigh everything… We must measure the cloth not thrice but thirty times before cutting. But this issue has been raised with good reason and I must say that we won’t only be thinking about it but also moving in this direction. We will resolve the issue of the growth of tariffs and of limiting it next year. We’ll make this decision anyway. It’s hard for me to cite the parameters now. I’m afraid to do this in advance, to announce this in public now. But we will certainly move towards restricting tariffs and will think of how to regulate the replenishing of municipal budgets step by step, without any rush, and we’ll do this, among other things, at the expense of the infrastructure facilities. I’m telling tell you this in quite definite terms.

As for rural roads, I have already said in my speech and want to emphasise once again that we have made a decision to establish regional road funds. But every region must determine their own priorities in using these funds. According to preliminary estimates, they receive very handsome sums that are a real source for developing roads. I cannot but agree with the last speaker: when we speak about rural areas, we must primarily think about transport safety for children. If we talk about restructuring the school networks and transporting children, we must resolve the issues of transport and roads before we shut down small schools and begin transporting children to larger ones. Any other decision would be absolutely irresponsible and wrong.

It was said (ostensibly I said this in my speech) that we must do everything to keep all small schools by all means. I’d like you to understand me correctly – I haven’t said that we must keep all small schools by all means. You should decide on where it makes sense to save them. We have a vast territory and shutting down everything in one go would be a grave mistake because it is impossible to deliver children to well-equipped regional educational centres or secondary schools on our enormous territory. We said it is necessary to develop roads, but this task requires time and money and we cannot do this overnight. And we do need to upgrade education now. So, what should we do? What measures are proposed as part of the reforms in school education and the school network? The government has allocated 120 billion roubles for the next two and a half years. What is the most reasonable way of spending this money? I’d like to repeat that we will allocate funds for transport, school support, the purchase of equipment, and in part for repairs. The money saved by the regions must be channelled into increasing the salaries of teachers. Their average salaries must be brought up to match the regional average. Many governors have already told me that this will be done by September 1 of this year. I understand that not every region can do this, but some have already done so. Maybe this will not be accomplished so quickly everywhere, but this must be done as soon as possible.

What does this mean? This means that our goal is to consolidate the common educational space of Russia and guarantee uniform educational standards in schools. What should we do with small schools in those places where it makes sense to save them? The proposal is to transform them. We should create large educational centres – good basic schools – and surround them with a network of so-called small schools. The latter’s managerial personnel can be cut down because the management must be transferred to basic schools. It is also possible to reduce some other expenses but it is necessary to raise the quality of education (as I have already said here) by making use of distance learning, for one. We will provide the funds for the purchase of the required equipment and the retraining of teachers. You must save small schools whenever necessary. For the time being we cannot achieve our goals in a different way and we probably shouldn’t.

Incidentally, in distributing the funds, we have agreed with the governors of the regions to send twice as much for every rural student than for any other under the programme of upgrading school education.

Now a few words about healthcare.  No doubt, it is essential to earmark funds for obstetric centres. I’d like to draw your attention to the following. Working at the level of the Ministry of Healthcare we have conducted a large amount of work with the regions. We have concluded agreements with all the regions – every region without exception! They specify how much money is earmarked for each region. It is up to every region to decide how much money to allocate to the rural areas, the district hospitals and so on – because this is the level of regional responsibility. These programmes have already been signed but they can be adjusted. You must be more active in working with the regional governors. We are ready to support you. I think – and I remind the regional governors and the Ministry of Healthcare to pay attention to it –that rural areas need to upgrade medical services for the people. Of course, money is required for this, but the money is available and must be distributed properly.

Now I’d like to speak about the level of deductions in tax sharing. As far as I know, in the past municipalities did not establish this level themselves but these deductions were simply larger. You know, I think we should look at this once again – you are quite right. We should look at how these taxes are split and think about how to replenish municipal budgets. We’ll certainly think about this.

Now I’d like to speak about support for rural areas. We started supporting them 10 years ago. Before rural areas had not received any help, and we know what kind of condition they were in. For all the difficulties – and we know that our rural problems go through the roof – the conditions in agricultural production have undergone a fundamental change. I have already said this and can repeat that I have just received confirmation of my words at the exhibition. Eight years ago we imported 1.6 million tonnes of poultry and this year only a little more than 200,000 tonnes. Our producers say that we can do without exports now and even ask us to do without them. This is a major achievement.

We have increased pork production several times. We still have problems with cattle. Obviously, beef cattle breeding is not yet up to the mark. It is only making the first steps, but many farms already have their own breeding herd.

We are developing dairy production. I’ve just talked to one of the producers;  he told me that the dairy market is too small and they are talking to Kazakhstan and starting to sell their products there. This is a major achievement, too, and credit for it goes to you. Thank you very much.

We remember how difficult the past year was. We had a drought for two years running and it was a big ordeal for agricultural producers. We recently recalled the drought and famine in the late 1920s and the early 1930s. Do you remember the consequences? Millions of people starved to death, although the drought was not as severe as in the past two years. You realise how different the consequences were. We still manage to go through such trials reasonably well because of the development of agriculture and the government’s recent support for it.

This year we have allocated 150 billion roubles from the federal budget directly for this purpose. Another 150 billion roubles will come from Rosselkhozbank (Russian Agricultural Bank) and other financial institutions. We continue to subsidise loan rates for agricultural producers. We’ll continue doing this, and, as you know, in some areas we subsidise up to 80%-95%. We have extended all loans that were taken last year because of the drought. We have also earmarked additional funds for the shipment of grain from the regions with a decent harvest to those regions that were short of grain. We have started subsidising these shipments. We have also allocated an additional five billion roubles to the farms that will continue to raise cattle regardless of any difficulties. By the way, one farm director told me that he kept his cattle and received the money.

We made additional decisions on banning grain exports, which you know about. Now things have come back to normal. Starting on July 1, we’ll lift the ban again in the hope the forecasts of the Ministry of Agriculture will come true and we’ll receive the expected 85 million tonnes of grain this year. It goes without saying that we will continue supporting rural areas in every part of the country and will consider what else we can do for this purpose. In any event, the government will not neglect to support a part of the country inhabited by almost 40 million people.

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Vladimir Putin’s responses to forum participants:

Question: I am the mayor of Kagalnitskaya, a rural community in the Rostov Region. As I listened to my colleague Svetlana Kutenko (the mayor of the Bystrogorsky rural community in the Tatsinsky District, Rostov Region), I was thinking: “Poor railway!” They had problems with cross-ties, which they had to get from another community, while we got paving stone from them. We painted those cobblestones, made a pond, put some swans in it – a little piece of beauty in the heart of the village. We might host a master class in landscape design now!

Vladimir Putin: Only please don’t dismantle the rail track!

Question: Mr Putin, I have another question. It’s very nice to hear about upcoming rural road construction grants, of course. It’s one of our critical problems, one we deal with every day. But it frightens me to consider whether we will actually be able to utilise these funds, because we have another huge problem that confronts us daily. The funding of rural road construction, maintenance and upgrading requires a complete set of design documents, including reports on prospecting, a topographic survey, and expert approval. These papers cost from 0.5 to 2.5 million roubles per kilometre of road, at times equalling the cost of the construction itself. The situation is even worse with footpath repairs, with design costs often exceeding expenditures on the job itself. Take an example from my village. When we decided to repair a small, 330 metre stretch of paved footpath in Kagalnitskaya, we made an estimate of the cost: drawing up design documents would cost 624,000 roubles, while the repairs would cost 508,000 roubles. This doesn't seem to be very rational to us, and so we kindly ask you to do something to direct some funds towards road repairs in villages. We could decide whether to replace design documents with designing estimates, which would cost only 20,000 roubles for that 330 metre path. This way, we can save something out of our modest budget to pay for the repairs. Thank you.

Vladimir Putin: You are perfectly right, I cannot add a word to what you said. We must untangle the red tape. The Ministry of Regional Development will make relevant amendments to the government decree. Mr Basargin, the minister, is here, and has heard everything. I fully agree with your idea, and we should implement it as soon as possible. I understand your problem perfectly, which is that you cannot obtain the funds without a stack of corresponding documents. But who will fund your projects? And where will you find the money to pay for these documents? So you are in a vicious circle, and I fully agree with you that it must be broken.

Question: Mr Putin, I am from the village of Rodniki in the Solikamsk municipal entity of the Perm Territory. The [federal] government recently allocated tens of billions of roubles for the development of neighbourhoods and courtyards. According to the media, however, the funds are intended only for Moscow, St Petersburg and regional centres. Why is this?

Vladimir Putin: Because of budget financing limitations. The total grant amount will be slightly over 40 billion roubles, of which federal allocations make up 26 billion, the rest coming from regional budgets. The situation there is very complicated. I often visit the regions, I see with my own eyes what’s going on there, and I admit that it's even worse in your village.

But I'd like to explain what's going on. It is not a federal duty to supervise courtyards and adjacent roads, and to fund their maintenance. However, we have met the regional governors halfway, and have allocated additional funds in order to start comprehensively addressing the problem. These grants, however, will certainly not suffice. Whenever I travel to other small towns, they always ask me why money only goes to regional centres. It's not just Moscow and St Petersburg, but the regional centres as well. Most likely, they too find the grants inadequate. This is solely due to budget constraints, and also because this is not our function.

I would like to return to the theme I was speaking on in my address, and in my comments about the opinions of our colleagues here. We have determined to establish road funds, and I very much hope that you will spend them wisely.

more to be posted soon...