Russia: the Industry and Energy Industry has proposed to allocate RUR 146.6 billion (approx. $6bn) for the development of Russia’s automobile industry

The Industry and Energy Industry has proposed to allocate RUR 146.6 billion (approx. $6bn) for the development of Russia’s automobile industry until 2015, RBC Daily has learned.

This is 61 times more than had been initially planned for research and development for transport mechanical engineering, which includes aviation. Experts say the money will go to Russia’s largest carmaker AVTOVAZ, chaired by the former head of the Federal Agency for Industry.

All contracts for research and development in transport mechanical engineering will be co-financed by the government, Industry and Energy Minister Viktor Khristenko told reporters yesterday following a meeting on research and development for transport mechanical engineering at the Salyut plant. “Contracts that are not properly financed could be suspended,” he noted.

At the meeting, Deputy Industry and Energy Minister Denis Manturov estimated the industry’s need for budget funding until 2015. According to RBC Daily, RUR 300 million (approx. $12.3m) will be allocated for the development of forestry mechanical engineering, while machine tool industry will get 200 times as much, and the car making industry will get the lion’s share of RUR 146.6 billion (approx. $6bn).

The substantial figure immediately attracted Prime Minister Viktor Zubkov’s attention. He said that Boris Alyoshin, the former head of the Federal Agency for Industry and current AVTOVAZ President, had facilitated the significant allocation for AVTOVAZ before leaving his government post. The Industry and Energy Ministry’s officials could not say how the RUR 146.6 billion would be distributed. Alyoshin has not commented on Zubkov’s remark.

Analysts say the money would be used to modernize AVTOVAZ, as well as develop and launch new car models. “AVTOVAZ alone has enough authority to lobby for such a significant allocation, says Sevastyan Kozitsin, at BrokerCreditService. “Besides, other car manufactures have far smaller capital expenses and investment needs,” he added. Without AVTOVAZ, budget spending for the automobile industry would stand at RUR 1 billion (approx. $41m), Kozitsin calculated.

Other industries were less lucky. Zubkov pointed to the lack of private financing for research and development in federal target programs. The National Technology Base program planned to raise RUR 4.9 billion (approx. $200.6m) in non-budgetary funding in 2007, but only 10 percent was raised in the first nine months of this year, while the Aviation Equipment Development program raised only 4 percent of planned non-budgetary financing.

Meanwhile, not all state companies expect support from the government. Moscow Machine Building Production Plant Salyut, a state-owned company, carries out research and development projects at its own expense. “Over the past four years, the company has implemented research and development projects worth a total of RUR 4.4 billion (approx. $180m), and it has spent RUR 6.4 billion (approx. $262m) on technical modernization over the past five years. Of this amount, only RUR 221 million (approx. $9m), or 5 percent, came from the budget,” Salyut General Director Yuri Yeliseyev told RBC Daily. As a result of its R&D spending, the company created a new heavy jet fighter engine, AL-31-FM1, in 2006, for the fist time in the last 20 years, and completed the development of the АI-222-25 engine for the Yak-130 military trainer aircraft in 2007.