ANNOUNCEMENT 26 Apr 2019

On 26 April 2019, the Russian Government unveiled a new program of preferential loans to agricultural producers, valid 1 June 2019 - 31 December 2022. 

NUMBER OF INTERVENTIONS

1

  • 1 harmful
  • 0 neutral
  • 0 liberalising

SOURCE

Government of the Russian Federation. Resolution dated April 26, 2019 No. 512, "О предоставлении из федерального бюджета субсидий российским кредитным организациям, международным финансовым организациям и государственной корпорации развития "ВЭБ.РФ" на возмещение недополученных ими доходов по кредитам, выданным заключившим соглашения о повышении конкурентоспособности сельскохозяйственным товаропроизводителям (за исключением сельскохозяйственных кредитных потребительских кооперативов), организациям и индивидуальным предпринимателям, осуществляющим производство, первичную и (или) последующую (промышленную) переработку сельскохозяйственной продукции и ее реализацию, по льготной ставке” ("On the provision of subsidies from the federal budget to Russian credit organizations, international financial organizations and the state-owned development corporation VEB.RF for reimbursing their lost income on loans issued to agricultural producers (excluding agricultural credit consumer cooperatives) that entered into competitiveness agreements, organizations and individual entrepreneurs engaged in production, primary and (or) subsequent (industrial ) processing of agricultural products and their sale, at a reduced rate ”), https://www.garant.ru/products/ipo/prime/doc/72134382/#review

Order of the Ministry of Agriculture of Russia dated 09.07.19 No. 388 (On approval of the procedure and selection criteria of agricultural producers (excluding agricultural credit and consumer cooperatives), organizations and individual entrepreneurs, carrying out production, primary and (or) subsequent (industrial) processing of agricultural products, to conclude agreements on increasing competitiveness, as well as forms of an agreement on improving competitiveness). http://www.consultant.ru/document/cons_doc_LAW_331508/

General presentation of the Russian ministry of agriculture on the program, https://export67.com/files/251/msh_normativka-spk-dlya-r.pdf

2020 Waiver of Performance Indicators due to COVID-19 outbreak: Government Resolution N677 dated 14 May 2020. The introduction to the document mentions "agricultural exports" instead of "transportation of goods through listed hubs": http://government.ru/docs/39692/

Inception date: 01 Jun 2019 | Removal date: 01 Jan 2023

Export subsidy

On 26 April 2019, the Russian government launched a new program of preferential loans to farmers, as well as to organizations engaged in primary and secondary processing of agricultural goods. To be eligible for the loans, agricultural producers and processing companies should sign a "competitiveness enhancement contract" with the Russian agriculture ministry. Once the competitiveness enhancement program is approved by the ministry and the company is in the designated register, it is eligible for short-term loans or investment credits. 

The new program extended the coverage of the old program in terms of eligible products and agricultural and food processing activities. Under the new program, the short-term loans (up to 1 year) are available to the companies seeking to purchase, for subsequent processing, the following goods: 

  • sugar beetroot
  • sugars
  • grains
  • flours
  • milk powder
  • oil plants
  • live animals and animal and poultry meat
  • berries and other wild forest resources

 The investment loans target the construction of new or modernizing the existing capacities and the purchase of hybrid breeding stock,with maturity terms of 2-15 years. 

Under the capacity construction and modernization projects, the following sectors have been added under the new program: 

  • feed mills, food concentrate industries
  • wild forest food processing
  • processing of oilseeds, production of enzyme
  • manure processing
  • bioenergy plants
  • processing and storage of fish and seafood
  • storage, processing, transshipment of grain and oilseeds
  • port infrastructure for storage, transshipment and sale of cereals and oilseeds, products made of thereof and fish. 

The program is nested under the new federal government budgetary support program titled "Exports of production of the agro-industrial complex", whose aim is to increase Russia's agricultural exports.

Interestingly, the presentation of the program by the Russian ministry of agriculture mentions the potential risk of WTO complaints, should the volume of agricultural exports be chosen as an indicator of the program's effectiveness, recommending instead to monitor the volume of production transported through logistics hubs agreed on by the loan-taker and the government. 

Despite the "logistics hubs" workaround, the government website describing COVID-19-related support measures and legislation formalizing such support continues to refer to "exports in exchange for subsidized loans." (see sources listed).

To be eligible for short-term loans, a company should have transported goods worth at least 25% of the value of the required loan through the listed hubs in the preceding year, with the annual growth threshold of the value set at 3%. 

To be eligible for investment loans, a company should commit to a) maintaining its existing volumes of goods transported through listed hubs and b) increasing the annual amounts by 5%-35% of the value of the loan, depending on the loan maturity and the product concerned. 

The 2020 federal budget lists the following allocations under the program: 90 billion rubles for 2020, as well as projected allocation of 84 billion for 2021 and 88 billion for 2022 (USD 1.4 billion, 1.3 billion and 1.3 billion respectively). 

On 14 May 2020, in the framework of state support measures to the local economy, the government suspended the application of eligibility criteria (volume of goods transported through listed hubs). The agricultural companies will continue to pay subsidized interest payments in 2020, even if they fail to meet their export/listed-hub-transportation indicators for that year. The decision entered into force on 15 May.