We will soon have to start cutting the cost of labour so that public companies don't go under or that all Croatian taxpayers pay the price of heating, Milanovic said during Question Time in parliament.
He added that heating in the eastern town of Vukovar was three times more expensive than in Zagreb.
Economy Minister Radimir Cacic told reporters in parliament that a 37 per cent increase in the price of heating, requested by the HEP power supply company for Zagreb, Velika Gorica, Samobor, Zapresic, Osijek and Sisak, was justified.
Cacic said he would ask HEP to define, together with the welfare ministry, a programme to co-finance the introduction of heat consumption meters for about 20 per cent of low-income citizens which would enable to cut costs by 70 per cent.
He said HEP's District Heating company had accumulated HRK 1 billion in losses by this year, including HRK 320 million in 2011.
Cacic said it was unacceptable that HEP should cover the losses of District Heating through the price of electricity, "that 95% of Croatian citizens should pay the subsidized price of electricity for five per cent of citizens who receive heat from HEP's heating plants."
He said that even with the announced increase, the price of heating in the six cities covered by HEP's District Heating would be about twice lower than in towns with locally owned plants.
Cacic said the reason for the increase was the rise in fuel prices which had exceeded 110% in recent years, and that HEP bought the fuel on the market. "Since the labour force impact on that price is only 5.5%, HEP has no room to impact the remaining 94.5%."
He accused the previous government of the whole situation because in 2010 it rejected HEP's request for a 45% heating price increase, even though it had been approved by the Croatian Energy Regulatory Agency.
(EUR 1 = HRK 7.4)