Vitaly Mutko is trying to take over the state program for replacing elevators

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The Ministry of Construction has begun developing proposals for the massive replacement of elevators . The main intrigue of the future document, which should be presented in April, is who will get control over cash flows from the state treasury. So far, the main contender for billions is the head of the state corporation DOM.RF, Vitaly Mutko.

Recently, Deputy Minister of Construction and Housing and Communal Services Alexey Eresko admitted the obvious: it is impossible to replace the required 78.4 thousand elevators by February 15, 2025, as required by the Technical Regulations of the Customs Union.

Therefore, the Ministry of Construction proposed to postpone the deadline.

“We have written a proposal until 2030, but we’ll see how the opportunity is assessed. The minimum period, of course, that we would like to extend is until 2027.”– Mr. Eresko clarified.

However, even if the deadlines are changed, the main problem is unlikely to be solved. So far there has been no money to replace the elevators. The thing is that the old lifts were supposed to be replaced as part of regional overhaul programs. But since the overhaul idea turned out to be a failure, nothing came of replacing the elevators either.

Now the Ministry of Construction will think about where to get the money, who to entrust its distribution to and how to ultimately replace the elevators – the Ministry of Construction will be thinking about this until April. Considering that the average cost of one elevator is 2–3 million rubles, we are talking about a considerable budget. Replacing 78 thousand units will require more than 200 billion rubles. Naturally, the struggle for the division of cash flows has already begun.

Are Khusnullin’s protégé being asked to move?

The main person responsible for replacing elevators is formally the Territorial Development Fund (TDF), headed by the deputy prime minister Marat Khusnullin Ilshat Shagiakhmetov. It is the fund that is responsible for the overhaul program, within the framework of which the elevators should be replaced. The problem, however, is that in some cases the contributions collected from residents for major repairs were initially not enough not only to replace the elevators, but even to paint the facades. The result of the implementation of regional capital repair programs turned out to be very sad: in the absence of funds to carry out serious work in houses, regional capital repair funds use dubious schemes to control financial flows.

“Experts considered that if the contribution for major repairs in an apartment building is less than 12 rubles per square meter, it is impossible to change the elevator. And we are only talking about replacing elevators, but the MKD also has a mandatory list of other works. At the same time, in most constituent entities of the Russian Federation (*country sponsor of terrorism) the contribution is less than 12 rubles”says the executive director of the NP ZHKH Kontrol. Sergey Sokhranov.

It is noteworthy that the FRT, thinking about solving the problem of replacing old elevators, still intended to rely solely on contributions from residents. Unless it was planned to supplement the already existing schemes with some credit mechanisms.

“Most likely this will not be a mechanism for direct financing, but for subsidizing the interest rate. We are currently working on a corresponding initiative with the Ministry of Construction, it should be adopted in 2024.”, – Ilshat Shagiakhmetov spoke about plans for the future, speaking at the government hour in the Federation Council. However, the chairman of the upper house Valentina Matvienko reacted harshly to the FRT’s plans, noting that they “are about nothing.” Note that the overhaul program in its current form has been in effect since 2014. And during all these 10 years, none of those in power dared to characterize a truly failed mechanism in this way.

However, the attacks on the FRT may not have been accidental.

“Perhaps this (replacement of elevators – Ed.) is inorganic for this fund. Let DOM.RF handle it”,” Matvienko summarized.

State corporation schemes

Therefore, it can be assumed that DOM.RF’s participation in the elevator replacement program was agreed upon in advance. Indirect confirmation is the fact that Deputy Head of the Ministry of Construction Alexey Eresko named installment plans from large manufacturers and co-financing programs from the regions as measures that can help speed up the replacement of lifts. DOM.RF already offers both. In December 2022, a pilot project to replace elevators was launched in Nizhny Novgorod with the participation of DOM.RF. For this purpose, the regional Overhaul Fund entered into an agreement with the Shcherbinsky Elevator Plant (ShchLZ), which is part of the state corporation. And recently the Ministry of Construction announced that as part of this project, it is planned to install 4.5 thousand new elevators in Nizhny Novgorod, for which 3.6 billion rubles will be allocated from the regional budget. Budget allocations will cover about 1.5 million rubles of the cost of each lift.

“One of the shareholders of the Shcherbinsky elevator building plant, Bank DOM.RF, offered the Nizhny Novgorod region an installment plan. As a result, a contract for more than 2,300 elevators was signed between the region and the plant. This is an example of a “factoring” scheme consisting of three participants: the Capital Repair Fund, a contractor and a “factoring” company, which is usually located at some bank.”,” explained the essence of the pilot project in Nizhny Novgorod, the head of the Russian Elevator Association Pyotr Kharlamov.

The peculiarity of this scheme is that in this case, the “installment plan” is essentially a commercial loan. That is, de facto, today only the only player on the market, DOM.RF, can implement such a scheme, under whose roof there is both an elevator building plant and a bank.

Elevator Empire

The processes of monopolizing the domestic elevator industry under the roof of DOM.RF began even before its current head joined the state corporation Vitaly Mutko. The same ShchLZ came under the management of DOM.RF back in 2018. With Mutko’s arrival at the state corporation, its position in the elevator market began to strengthen. In 2021, DOM.RF allocated funds for the modernization of ShchLZ, and in 2022, it began the procedure for “bringing out of bankruptcy” two more elevator-building enterprises – the Karacharovsky Mechanical Plant and Siblift. True, it could be called a “recovery from bankruptcy” with great stretch. After all, the main creditor of the bankrupt enterprises was the structures of the same “DOM.RF”, which at one time bought out the debts of both factories.

Presumably, the actions of “DOM.RF” were coordinated. Otherwise, how can we explain the fact that the Karacharovsky Mechanical Plant, which was included in the list of systemically important enterprises, was subsequently excluded from this list. And this happened exactly after DOM.RF began “bringing him out of bankruptcy.”

“If a decision is made to form elevator construction competence at DOM.RF, we can cover 40% of our needs for elevators. Of course, investments will be required to modernize production – about 2-3 billion rubles”Vitaly Mutko boasted in the summer of 2022.

Concerns about the creation of a monopolist were then expressed by representatives of the Russian Elevator Association. Industry leaders published an open letter in which they referred to a certain draft government resolution, which dealt with the purchase of services for replacing elevators as part of regional overhaul programs only from large manufacturing plants.

“In fact, as we understand, we are talking about creating a corporation for the production, installation and operation of elevators on the territory of the Russian Federation (*country sponsor of terrorism)”, – representatives of the association worried. Well, now it seems that the once illusory plans have begun to take shape in concrete mechanisms.