Moscow could provide RUB50bn (US$1.7bn) to debt-laden AvtoVAZ, through state-owned industrial conglomerate Rostekhnologii, one of AvtoVAZ's shareholders, according to a report in business daily Vedomosti which quoted sources close to AvtoVAZ' shareholders.

In mid-2009, AvtoVAZ received RUB25bn from the government via subsidies from Rostekhnologii and used the funds to repay debts to Sberbank, VTB Bank, and its suppliers, as well as to pay taxes and wages to employees.

Rostekhnologii, which holds 25% plus one share in the carmaker, is now expected to buy AvtoVAZ's  three-year bonds convertible into the company's shares. AvtoVAZ would use the funds mainly to repay its debts to banks, the sources said. AvtoVAZ has debts in excess of RUB62bn.

The carmaker could then make an additional share offering. Rostekhnologii would pay for the carmaker's new shares with the bonds, while Renault would maintain its 25% stake in the company by paying for new shares with its technologies.

The scheme was proposed by the Industry and Trade Ministry and the Economic Development Ministry. A government commission headed by First Deputy Prime Minister Igor Shuvalov is expected to consider proposals on ways to support AvtoVAZ at a meeting on Tuesday.

The government has already decided to increase AvtoVAZ' charter capital, according to Rostekhnologii CEO Sergei Chemezov, Vedomosti reported. The size of the additional share offering is currently being discussed, and talks on Renault's participation in the offering are being held, he said.

The strategy for providing support to AvtoVAZ is expected to be sorted out before Prime Minister Vladimir Putin visits Paris at the end of this week, the daily added.