GOVERNMENT OKAYS INCREASE IN GAS PRICES

ZAGREB, Aug 22 (Hina) - The Croatian government on Thursday adopted gas tariff systems which will go into force at the start of September, but returned a proposed tariff system for electricity to the state utility company HEP for fine-tuning, demanding that the maximum price increase for households be nine percent. #L# The price of gas for citizens will increase by 12.39 percent and for the economy by 12.25 percent. This will increase the costs of living by 0.18 percent. Members of the government said the increase in the price of gas was necessary to invest in the gas system. Prime Minister Ivica Racan announced that the next government session might tackle a national gas supply system project worth almost US$500 million, the amount necessary to build systems covering Istria, central and northern Croatia, and Dalmatia. The Economy Ministry and the government did not okay in its entirety a HEP proposal for new electricity tariffs, according to which HEP would have increased its revenue by raising prices in the industry sector by 0.5 percent, for entrepreneurs by 2.6 percent, and for households by 15.2 percent, which would have constituted an average 8.5 percent price increase. The government was against having the entire burden of HEP's restructuring transferred onto households. It was decided that HEP should fine-tune its proposal within the week by not raising prices for the industry sector and entrepreneurs, and increasing them for households by a maximum nine percent. The average increase would thus be 4.5 percent and 0.3 percent higher costs of living. The government urged HEP to rationalise the cost of labour, and submit a plan which would reduce operating costs and improve the quality of supply. The government gave its consent to Croatian Railways (HZ) to incur a 600 million kuna (EUR81.1 million) debt with Zagrebacka and Raiffeisen banks, and adopted a decision on settling HZ's loan commitments with collateral in the amount of EUR101.6 million. (hina) ha sb