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On April 2, 2014, the Government of the Russian Federation approved with Decree Nr 256 the subsidisation of milk producers. To become eligible for the scheme, the loans must be used for instment in milk production with a maturity of no greater than 15 years.
The purpose of the state subsidies is to alleviate the difficult situation the Russian milk production and processing sector faces. Andrej Danilenko from the National Union of Milk Producers explains that the negative development of the sector is a consequence of rising prices of raw milk since 2012 due to reduced number of dairy cattle provoked by a lack of mixed fodder and fodder grain. As a result, the Russian milk producers started experiencing sharp cash deficits. As Danilenko further clarified, the crisis on the local milk market led to an increase in milk imports; his import forecasts for 2013 are for 11 million tons, compared to the 2012 figure of 9 million tons.
In addition, this state measure can be analysed with the 2012 statement of the President of the Russian Federation, Mr Vladimir Putin, that the interests of the economic sectors, agriculture included, who meet the most intensive competition from abroad after the WTO accession, will be considered. Furthermore, in the Annual Presidential Address to the Federal Assembly held on 12 December 2013, Mr. Putin declared: "Companies, registered in foreign jurisdictions, must not benefit from state support, including from Vnesheconombank and state guarantees. Their access to contracts for state orders and for contracts with structures with state participation must be eliminated". In conclusion, although the end beneficiaries of the allocated subsidies to the subjects of the Russian Federation cannot be directly identified, it can be expected that they will be Russian.
The GTA includes state guarantees and other financial incentives that are likely to affect the restructuring and performance of firms facing international competition, whether from imports, in export markets, and from foreign subsidiaries.
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