UPDATE 1-Russian state to settle AvtoVAZ debt - PM

* May raise 55 billion roubles on the market

* Undertaking the task of settling debts, social issues

* Other shareholders should present development plan

(Adds details, quotes, background)

NOVO-OGARYOVO, Russia, Nov 3 (Reuters) - The Russian government will undertake to settle debt at AvtoVAZ (AVAZ.MM) and could raise $2 billion on the market to support the troubled car maker, Prime Minister Vladimir Putin said on Tuesday.

"We will have to resolve the problems of ... AvtoVAZ' debts, it's a tidy sum, 38 billion roubles... But it's not enough, money is also needed for long-term development," Putin told a government meeting.

AvtoVAZ, in which French group Renault (RENA.PA) owns 25 percent, plans to cut a quarter of its workforce in Togliatti -- an industrial city on the banks of the river Volga that only exists for the plant's workers -- to cope with plummetting car sales during Russia's first recession in a decade.

The group has repeatedly warned of bankruptcy after experiencing a collapse in demand while grappling with about 60 billion roubles ($2.05 billion) of debt. [ID:nLJ63362]

Putin, speaking at the Novo-Ogaryovo residence outside Moscow, said the company would need at least 12 billion roubles to finance the car-family renovation, and another 4.8 billion roubles to create new jobs.

"There are suggestions that these funds should be taken from the market and used to support the plant... This means that the government is undertaking the clearing of debt burden and the solution of social problems," he said.

Putin said other AvtoVAZ shareholders, both Russian and foreign, should come up with an adequate development programme for AvtoVAZ. Renault, which has an alliance with Nissan Motor (7201.T) of Japan, declined to comment.

Putin did not indicate in what form the government would raise the funds.

For a recent story on Renault/AvtoVaz see [ID:nL2169935]

($1=29.23 Rouble) (Reporting by Darya Korsunskaya; additional reporting by Helen Massy-Beresford, writing by Maria Kiselyova, editing by Marcel Michelson)