Serbian Finance Minister Diana Dragutinovic has announced that the wage increases in the state-owned company Electric Power Industry of Serbia (EPS), which have been approved by the government, will be paid for from the profits made from increasing the price of electricity.

Dragutinovic told the Jan. 14 edition of the Press daily that the government had approved an EPS wage increase of RSD7,000 and added that linking wages to profit was "the least poor solution."

"I presume this is the profit that will be the result of the announced price hike of electricity," she added.

EPS plans to increase the cost of electricity by 10 percent during the start of this year and has explained that the price hike is necessary in order for the electric power system to function normally.

Representatives of the government and the EPS Union agreed on Jan. 8 that RSD3.75 billion would be set aside from profits made last year and this year. This would be paid at a flat rate to employees during 2010, which works out to an eight-percent monthly addition to wages.

After staging a strike on Jan. 11 and 12, workers of the Nikola Tesla Thermal Power Plant, which operates as part of EPS, received an 8.5 percent wage increase because they will be paid for shift work.

According to earlier EPS management data, the public company's loss in 2009 will amount to around RSD2 billion and around RSD20 billion in 2010, despite two electricity price hikes of 10 percent each.

During negotiations with the International Monetary Fund, the government was obliged not to increase pensions and wages in the public sector in 2010.

EPS management, however, has said that the wages of its employees will not be increased, but rather that bonuses will be paid from the real profits of the company.

National Investment Plan Minister Verica Kalanovic said that it was not acceptable that Serbian citizens should pay more for electricity in order for EPS employees' wages to be raised.

"As National Investment Plan minister, I cannot understand increasing electricity prices simply because of investment in Electric Industry of Serbia, which is vital right now, but not employee wage rises," Kalanovic told BETA, adding that the wages in EPS were "significantly above the national average."