BELGRADE, September 4 (Beta) - Serbian Prime Minister Zoran Djindjic announced that the price of electricity would probably increase by 10 to 15% in October.

After last night's DOS Presidency meeting, Djindjic concluded that a rise in electricity prices was necessary not only because of demands made by the Electric Power Industry of Serbia (EPS), but also as part of an arrangement with the International Monetary Fund.

He told the press that Serbia could not be granted favorable credits for renovation of the electric power system if "they are mostly spent on subsidies or social welfare through maintaining low electricity prices."

Djindjic described EPS's demand for a 46% electricity price rise as "astronomical", adding that the government would back neither that figure nor the International Monetary Fund's demand for fixing the price based on cost of production.

The government is set to discuss the issue of electricity prices at its next session.

Commenting on accusations that the government abetted cigarette and tobacco smuggling with its decree on trade in Kosovo, Djindjic shot back, calling it a 'sheer and unfounded fabrication' and added that the decree in question actually prevented smuggling and allowed only minimal trade with Kosovo.

According to him, the decree defines goods bound for Kosovo as transit goods and therefore a transit tax is levied, since "it's not possible to collect customs duties in Kosovo."

According to Djindjic the decree "has restored order and reduced cigarette smuggling."