11 march 2011

Prime Minister Vladimir Putin meets with Ryazan Governor Oleg Kovalev and chairman of the Ryazan Region’s Farmers Union Vladimir Mimoglyadov



Vladimir Putin: Mr Mimoglyadov, we saw each other at an event in support of farmers a short while ago, didn’t we? [Link to the congress of the Russian Association of Farm Holdings and Agricultural Cooperatives in Tambov].

In your speech there, you said it was quite distressing that the farmers in the Ryazan Region receive less aid than their counterparts elsewhere in Russia.

I told you then that I knew the Ryazan governor personally, that he’s a responsible and experienced leader, and that the three of us could meet when I come to visit. 

So here I am, and the governor is here. He didn’t try to dodge the meeting, as you can see. He even called me to suggest we meet to discuss these issues. He said he would be glad to redress any imbalances he may have overlooked.

Prior to our meeting today, I tried to find out what is currently being done in the Ryazan Region to support agriculture and small-scale farming. A programme is underway to promote small and medium-sized businesses in 2010-2012.

Support for agriculture is a priority in this programme. In the programme, 21 entrepreneurs from rural areas were offered aid in 2008; this number rose to 59 in 2009 and 175 the next year. The number of rural recipients increased from 18% in 2009 to 36% in 2010.

Of the 161 grants awarded to startups in 2010, 81, or one half, went to rural-based entrepreneurs. Fourteen of the awardees used the money to start a farming business. Some 230 loans were approved for small businesses, with 30% going to rural entrepreneurs. This despite the fact that rural businesspeople didn’t apply for micro-credit in 2009.

I also looked up some specific information on your farm. You hold 610 hectares, don’t you?

Vladimir Mimoglyadov: Yes, I do.

Vladimir Putin: You’ve got a nice farm, growing grain, beans, and so forth… You have a John Deere tractor, two MTZ tractors, a combine harvester with all the necessary mounting equipment.

As far as I know, you received 1,536,000 roubles in subsidies in 2008; 909,000 in 2009; and 1,647,000 in 2010.

Most of the funding came from the federal budget, but the region contributed as well. In 2008, some 389,000 roubles were allocated to you by the region and 1,149,000 by the federal government; in 2009, 155,000 and 753,000 roubles, respectively; and in 2010, 355,000 and 1,291,000. All in all, 4,092,000 roubles.

So the problem isn’t so much with your own farm, I assume, as with the Farmers Union partnership you lead, Mr Mimoglyadov.

Please tell us about the situation in detail, will you? It was hard for you to explain things at length when you spoke at the [Tambov] forum, with so many people in the audience and so many questions to take. But now we can have a quiet, in-depth conversation. So please go ahead.

Vladimir Mimoglyadov: Thank you, Mr Putin, for giving me the opportunity to talk personally to you and to Mr Kovalev.

Getting back to the issue I raised at the farmers’ congress, we communicate with our counterparts all across the country.

In your speech, you said that traditionally, the [federal] government provides a lot of aid for farmers in Tatarstan. But here, in Ryazan, we don’t get as much aid as they do in Tatarstan. And in some sectors, we get no aid whatsoever.

Vladimir Putin: Mr Minnikhanov [President of the Republic of Tatarstan] is sure to award you an honourable citizen title…

Vladimir Mimoglyadov: You think so? Well, I wouldn’t mind.

Vladimir Putin: You’ll become a Tatar of honour…

Vladimir Mimoglyadov: Since we have a limited regional budget and rely more on the federal government for subsidies, we’ve encountered quite a few difficulties in the past couple of years. The output of our dairy husbandry has been shrinking with every passing year. As a result of that decline, we’ve failed to qualify for the federal programme you just mentioned – an additional 5 billion roubles for the support of dairy husbandry.

Vladimir Putin: Because of the livestock reductions, right?

Vladimir Mimoglyadov: Absolutely. But this is not just the farmers’ fault, I think. It’s mutual. And the Ryazan Region’s government is also to blame. If this were an isolated case, we could talk about farmer negligence. But if we analyze the situation over the past three years, we see there’ve been selling price dips. Many farm managers decided to downsize as they thought this would help them cope with these difficulties.

Under a regional aid programme, a rouble or two in subsidies is allocated per litre of milk. In the past two years, this programme ran only through April, with no further funding released in the remaining eight months. People expected the promised aid, but it didn’t come. This is part of the reason behind the recent livestock reductions.

Vladimir Putin: You mean some aid was promised, but not delivered in full?

Vladimir Mimoglyadov: Yes, the subsidies were announced, with the necessary funding put aside. But in April, the actual money just stopped flowing in. This has been the case for the past two years.

Vladimir Putin: Is this due to budget limitations, Mr Kovalev?

Oleg Kovalev: Not quite, no. We usually provide milk subsidies when the price is on the decline. But last year saw a sharp increase in milk prices. Today, the selling price is so high there’s no need for subsidies. Milk has become cost-effective, and yields a 30% profit. The outset of 2010 was a hard time for us, so all the money we received that year…

Vladimir Putin: We had some powdered milk brought in from abroad, as well; we should make sure the imports continue…

Oleg Kovalev: We subsidised milk in the first quarter of 2010 because the prices were low then. But we saw them rise steadily in the second, third and fourth quarters. Now they’ve reached 16-17 roubles, and even 20 roubles for high-quality milk. So there’s just no point in subsidising at the moment.

Vladimir Putin: You mean the subsidies were suspended not for lack of money, but because they were deemed unnecessary, right?

Oleg Kovalev: This was provided for in the budget. We have very powerful agricultural representation in the regional Duma. We have almost a quarter of the Duma, that's for sure – deputies and farmers who are heads of organisations, one way or another involved in the agricultural sector. And they simply do not budge.

Regarding the budget, 2009 was, of course, difficult because of the crisis. In 2010, 4.5% of the expenditure side went to rural areas. We have some of the highest interest rates in the country in the Central Federal District. Of course, the budget of the Ryazan Region itself is not so radically different from that of Tatarstan, which you cited, and of course, our opportunities are more limited in this respect, but we perform all of our obligations under the co-funded federal programmes. Some of the cows, of course, we slaughtered – those cows that were sick and had to be replaced... But overall, we believe that by the end of the year, the cattle population will remain at the 2010 level.

Vladimir Putin: Mr Mimoglyadov said that by the end of the year, perhaps the number of livestock will increase, but at the beginning of the year, the farm will not break even because of the decline.

Vladimir Mimoglyadov: That's absolutely correct.

Oleg Kovalyov: We had a decline in 2010. But, unfortunately, we have… say, our private farmers are not engaged in dairy farming. Furthermore, there was a great reduction in the number of cattle farms, but in the collective sector, the reduction of large enterprises was negligible. And today, there are barns that have not yet been filled with cattle. In other words, they cannot immediately be filled, especially when we're talking about Russian cattle. First, the cows are to calve, and then they put the heifers there and fill it with 2,000 head... That's why this process, of course, will be completed.

I can agree that maybe I've had little contact with the farming community, and we need to rally the farmers. I think that we will meet, sit with them, have a talk, discuss all the topics, listen to each other, maybe somebody will propose something specific – how to improve, say, the allocation of money that goes to rural areas, to create incentives for increasing the cattle population, productivity and so on.

I am also not happy with everything in that you cannot give grants, for example, for milk all round – to those who slaughter cattle and those who, by contrast, raise them, those who milk 3,500 kg and those who get 6,000 kg per cow. The average yield for the region is 4,500, and somewhere someone milks 3,500, and of course, he drags everything down. Why would one subsidise him?

What is the main goal? Maximise profitability at a certain level of efficiency, because we must count on our agricultural companies, whether they are farms or some large business, being profitable and able to survive in a competitive environment.

Vladimir Putin: Mr Mimoglyadov, the governor proposes a meeting. What do you think, what other issues do you believe should be raised at this meeting between the governor and the farmers, other than what you already mentioned?

Vladimir Mimoglyadov: If we carry the thought through to its logical conclusion, Mr Kovalyov said that private farmers are not so actively engaged in dairy farming. This turns out to be a general issue. If we all go into the grain sector, we lose the feed supply. People who have kept the cattle and planted forage crops for feed, begin to sow wheat. We get a market imbalance. Everyone goes for wheat, wheat will be unclaimed, and because of this, we get waveform discontinuities. We are all interested in a stable dairy industry, meat industry and crop production. I think the problem is acute. To date we have received...

Vladimir Putin: Which problem?

Vladimir Mimoglyadov: The issue of subsidising dairy farming. Mr Kovalyov said that so far we are willing to subsidise only the highly efficient farms. This approach implies that if you milk a certain amount, you get a different ratio. It turns out that the farm that does not fall under this criterion has already punished itself, because it depends on each litre. If he has a cow that yields 3,500 litres of milk, he still gets this volume. If it is one of the leading farms that milk 5,000 or 6,000 litres, it will accordingly get more money.

The fact is that, based on the correction factors, those forms of farming again turn out to be at a disadvantage. It is alarming that, in connection with such measures, we could lose...

Oleg Kovalyov: I understand this. This is also a topic for discussion. Look, the budget – it's public money; it belongs to the public as a whole. Why should society subsidise the producer who does not want to plant seed, breed livestock, or provide his animals with veterinary care and milks only 3,500 litres, when the average yield for the region is 4,500?

Vladimir Mimoglyadov: May I reply?

Vladimir Putin: Yes, of course.

Oleg Kovalyov: I'm not the only one who makes these decisions – the Ryazan Region Duma makes these decisions.

Vladimir Mimoglyadov: I agree. I'm not arguing, just expressing my point of view. Why did we have the recent jump in milk production? The biggest reason was imports – the Belarusians stopped supplying powdered milk, and because of this, our milk is in demand. Another reason that we had growth was the weather conditions having exactly the same impact on cattle. They responded to these hot conditions and started to yield less milk – there was a deficit.

Vladimir Putin: There are problems with feed.

Vladimir Mimoglyadov: Yes, problems with feed.

Oleg Kovalyov: In 2010, we milked almost as much as in 2009 – we milked 1% less than in 2009.

Vladimir Putin: Alright. You know, let’s just not get into too many details. Let’s, Mr Mimoglyadov... What do I need to hear from you? What questions would you like to ask the leadership of the region, particularly the governor, at a meeting between farmers and the region's government, which Mr Kovalyov proposed and announced?

The first issue is subsidised milk. The governor has clarified his stance – it is not entirely unjustified, and surely you can agree with that, right? This is a subject for debate, discussion. Then, we will need to make a balanced decision along with the regional legislature.

What other issues do you think are relevant?

Vladimir Mimoglyadov: We had a farmers' movement emerge in the Ryazan Region in 1990. We have a lot of farmers who have no home – they work and have no shelter. And the programme, which now operates in support of young professionals, to some extent, it turns out, is not very accessible to small farms – due to the fact that the programme works like this: first you need to build a house, and then you receive a payment from the federal and regional budgets. I would like to discuss these points at this meeting, in the hope of creating conditions that would motivate small farms to build rural housing without difficulty.

Vladimir Putin: I said at our meeting there, that at the federal level, we will apply certain efforts. We will have to unite...

Vladimir Putin: …We’ll have to combine these efforts with regional ones. So there will be subsidies for certain products, particularly dairy products. The second issue is housing. Is this enough or do you want more?

Vladimir Mimoglyadov: In fact, right now, due to the spring field work, your order for fuel oil and lubricants ... As of November 1, 10% – at the moment this is a considerable discount.

Vladimir Putin: Around 30 and change.

Vladimir Mimoglyadov: 35. There may be more. There are concerns that we cannot reach the declared volumes, because a discrepancy arises and the oil distributors there are resistant...

Oleg Kovalyov: We will get everything down to the last kopeck. God willing, we will rectify these limits, which... We never chose.

Vladimir Putin: Mr Mimoglyadov's concern is understandable, because he really is working , with his own hands, and this is a real threat, I understand him. But to be fair, this issue should be raised at the meeting with the governor – discuss it. This is the third issue.

Oleg Kovalyov: Well, if they at least inform us – what kind of agreements, what, how...

Vladimir Putin: This will also discipline the distributors – absolutely. What else?

Oleg Kovalyov: We'll invite the oilmen.

Vladimir Putin: That's a good idea.

Vladimir Mimoglyadov: If we meet with Mr Kovalyov, we will probably, in the course of our work…

Vladimir Putin: I don't doubt it.

Oleg Kovalyov: Mr Putin, I have one general issue to raise with you.

Vladimir Putin: Go ahead.

Oleg Kovalyov: Many firms have told me that they think they are somewhat disadvantaged in terms of paying personal income tax. They pay tax on all the income they make. But part of that income they use for their own development, such as tractor purchases, high-quality seed, fertiliser, which leaves them a much smaller amount of income for their personal use – unfortunately, this is the way the tax system works. And here, of course, they would need to deduct the expenses they incurred on production development from the tax. Unfortunately, this problem, which we have discussed, it is quite complicated – in how it would be stipulated in the law. Viktor Zubkov and I also discussed it at the last meeting, I raised this issue.

Vladimir Putin: I do not think that everything is all that difficult. It is a fair assessment of the problem. The purpose of the tax on personal income is to tax private consumption rather than production, so we need to consider this. That’s correct.

Vladimir Mimoglyadov: I can add just a bit more on this subject because I am a payer of this tax, and we here are not in a competitive environment with the legal entities. If we are on the same taxation system, then we pay 13%, and legal persons are exempt from income tax.

Vladimir Putin: Yes.

Oleg Kovalyov: They are exempt from all taxes.

Vladimir Putin: In agriculture…

Vladimir Mimoglyadov: We are in an awkward position; we get subsidies from the federal and regional budgets, but we pay 13% of that in tax.

Vladimir Putin: It is unfair, I agree. We need to think about this. I will formulate the necessary instructions to the Finance Ministry and Economic Development Ministry – for them to consider the issue and submit proposals. This is absolutely correct, I agree. The money goes partly to the development of production and not for personal consumption, and it is private consumption that needs to be taxed. And the rest else... We need to think of what to do about the rest. I will certainly raise the issue with my colleagues.

Vladimir Mimoglyadov: May I ask another question?

Vladimir Putin: Go ahead.

Vladimir Mimoglyadov: At the congress, you raised a wide range of issues. The farmers are happy that you touched on almost all of the sore spots, and offered ways to resolve these problems. I would like to discuss one of these problems in more detail.

In my speech, I said that we do business in rural areas and we’d like to plan that work, to be able to predict where we are going. We discussed this topic at a meeting with Viktor Zubkov. We have a worthy goal – milling 85 to 90 million tonnes of grain next year.

Vladimir Putin: We would want that to happen.

Vladimir Mimoglyadov: In order to work more efficiently in this endeavour, we, of course…

Vladimir Putin: In order to have a decent carry-over next year...

Vladimir Mimoglyadov: …and for everyone to be interested in taking as much as possible, setting a lower threshold price in the rules for intervention, which would have meant getting a small return. If there's a price slump on the market, the land goes to the state and we will start to buy it.

Vladimir Putin: But we did it in previous years.

Vladimir Mimoglyadov: Experience from 2009 shows that we were given a figure of five roubles, and we negotiated a reduction, and then it went down to three roubles or less.

Vladimir Putin: Three roubles? You mean per tonne…

Vladimir Mimoglyadov: Exactly – 3,000 roubles per tonne.

Vladimir Putin: Three thousand? But we bought at 4,500-5,000 roubles.

Vladimir Mimoglyadov: That was in some years. In other years, we bought for…

Vladimir Putin: Yes, for 4,500 and 5,000 in other years, but were there years with 3,000?

Vladimir Mimoglyadov: For 5,500. But 2009 showed that there could be prices of 3,000 or lower.

Oleg Kovalyov: Mr Putin, this is the so-called pool method, when a base price is set and is then negotiated down. There is hardly anything that can be changed, because most of the countries in the world trade that way – they make intervention purchases of grain –intervention purchasing. But of course you have to identify some details so that after a certain decrease in the market is maintained – just as stocks are traded. At a certain decrease, the market is stopped and closed. Everything stops, because the momentum of the market works in favour of large traders and small sellers can suffer greatly in this scenario.

Vladimir Putin: Very well. I hear you. I have no recollection that such a problem existed.

Oleg Kovalyov: It's a very delicate subject…

Vladimir Putin: It's delicate, but it really affects the profitability of production and companies' viability.

Vladimir Mimoglyadov: That's absolutely true! It turns out that in 2009, most farms were operating at below the prime cost of grain. They were forced to, because they could only hold out for so long – there were no opportunities, so to speak…

Oleg Kovalyov: Here the trouble is compounded by the fact that they had nowhere to store the grain, because the harvest in 2009 was 1,650,000 tonnes. We hadn’t had that kind of harvest in 20 years in the Ryazan Region, even with the large fields. All the grain storage facilities were packed, and the farmers could not pay to store their grain. They had to sell it at the lowest price on the market.

Vladimir Putin: Mr Mimoglyadov, I hear you.

Vladimir Mimoglyadov: I would like to say some words of appreciation. When you described the national project, you included agriculture in the national project...

Vladimir Putin: In the list of national projects.

Vladimir Mimoglyadov: Yes, and farmers were able to acquire modern equipment. No one even remembers a year with weather conditions like in 2010. And in this very disastrous year, the yield was still about 60 million tonnes. It’s only because the farmers were able to retool and still obtain these results under different processing conditions. If we hadn’t had the equipment we had, then, I believe the situation would have been much worse...

Vladimir Putin: Thank you! I'm very glad to hear that. You're an expert after all. You graduated from a specialised university, yes?

Oleg Kovalyov: The Russian Agricultural Academy.

Vladimir Mimoglyadov: I'm a city dweller myself, and I honestly went to the Agricultural Institute for an education. I never thought that I would go to work in a village. But it turned out that I married a farmer's daughter. For two years I was treated... looking back, I can now say that I was lucky ...

Vladimir Putin: And back then, you thought that you weren't?

Vladimir Mimoglyadov: In the difficult years, I wanted to give up several times.

Vladimir Putin: Was it difficult?

Vladimir Mimoglyadov: It was very difficult.

Vladimir Putin: In the 90s we talked a lot about farming, but did practically nothing to support it.

Vladimir Mimoglyadov: I started in 1997, when all the support programmes had already ended. And so I came into this endeavour after university and by my nature, I did not quit.

Vladimir Putin: And you live where – in the city or the country?

Vladimir Mimoglyadov: During the winter, I live with my father-in-law.

Vladimir Putin: He puts up with you?

Vladimir Mimoglyadov: Yes, he helps. And starting with the spring sowing – in about two weeks – I'm moving there. I have a mobile home there – a trailer in the field. In early summer, my wife will come with the children.

Vladimir Putin: Do you have many children?

Vladimir Mimoglyadov: Two kids.

Vladimir Putin: Do you plan to build your own house?

Vladimir Mimoglyadov: There are a number of difficulties with this, but this year, my wife told me that she no longer wants to live in the trailer.

Vladimir Putin: You'll have to build.

Vladimir Mimoglyadov: Yes, there's no other way – I'll have to build.

Vladimir Putin: That's why you're raising the issue of the programme.

Vladimir Mimoglyadov: That's because the approach to this programme is difficult. If I am to build a house, I’ll have to start in the spring and be ready to move into it in the autumn.

Vladimir Putin: Well yes, modern building techniques allow this.

Vladimir Mimoglyadov: Yes if we go by the usual never-ending construction project model, nothing good will come of it

Vladimir Putin: I think that you'll be able to do it. I wish you every success and a productive meeting with the governor.

Vladimir Mimoglyadov: Thank you!