Serbian Deputy Prime Minister and Minister of Economy and Regional Development Mladjan Dinkic said today that production will start again at the petrochemical complex by the middle of September.

Speaking at a press conference after talks with the company’s trade union representatives, Dinkic said that next week his Ministry will propose to the Serbian government that they offer to help Petrohemija resume production and provide assistance to its social programme by providing funds of €10 million.

He said that the government will take steps to re-programme Petrohemija’s debts to Lukoil and the Serbian oil industry NIS, and will help the company close new long term contracts for the supply of raw petrol at low prices.

He said that agreement has already been reached with NIS concerning the reprogramming of the existing debt and new deliveries of raw petrol at a price 20% lower than present prices.

He said that an agreement has also been reached with Lukoil, to which Petrohemija owes €23 million, to supply raw petrol at almost half the previous price.

This will reduce costs and now we can make new contracts with NIS and Lukoil concerning the supply of more than 30,000 tonnes of petrol monthly, explained Dinkic.

He said that Petrohemija’s debt amounts to €224 million, which is larger than its overall assets.

The company operated with a loss of €100 million last year, while the company also lost €35 million in the first quarter of this year.

The firm is also burdened with a labour surplus of around 500 workers, according to the Ministry’s analysis.

A new job classification will be ready by August 31, Dinkic said and announced a voluntary social programme, offering €300 per year of employment for Petrohemija workers willing to take redundancy.

Dinkic will announce the appointment of a new general manager of Petrohemija on August 17.

Dinkic said there will be no tax increases or reduction of salaries in Serbia as it would further reduce demand, which is among the chief reasons for the recession.

The economically optimal strategy is to reduce expenditure and not to increase taxes, he said.

Dinkic also announced that an IMF mission will arrive in Serbia on August 24 for a second revision of the stand-by arrangement worth €2.9 billion, which will last until April 2011.

After meeting with the Deputy Prime Minister, Petrohemija workers stopped their strike.