Transcript:

Dmitry Medvedev: Good afternoon, everyone!

I would like to welcome all of you who are tuning in to this teleconference (I hope everyone can see and hear us). We are holding a teleconference today to discuss the progress of the spring field work and the situation as a whole in the agriculture sector.

As always of course the weather is having a significant impact on the situation, on labour productivity. There have been some unpleasant surprises this year: rough estimates have come in on losses of winter cereal crops. I would therefore like to find out from those taking part in this teleconference, the heads of the regions, what the situation is, and what measures are in place to minimize losses for the agricultural producers. And from those regions where drought conditions have already set in, I would like to know one thing – how much of the winter crop was insured this year, I mean under the old insurance system, because we are also going to talk about the new system.

Another issue which in my opinion is very important today is the situation regarding lending to enterprises in the agro-industrial sector.

As far as I know, and maybe you can correct me if I’m wrong (I am referring to the agency heads and governors here), loan accessibility has decreased of late: the weighted average interest rate on loans for conducting seasonal field work rose 2%, to 12% on average in the first quarter. That’s not good. We must find out what is going on here, apart from perhaps the general economic and global factors that affect interest rates. We have the latest loan statistics: the total amount of loans issued over several months up to May 10 was 20%-25% down on the same period last year, at least at some of the banks.

Let me emphasise that spring sowing should proceed in a routine manner, without resorting to emergency measures. Our agricultural producers should not have any problems with seeds or mineral fertilisers or fuel and oil and equipment. It is also important to ensure that government funds allocated to support agriculture reach their intended recipients.

As far as I know, the federal government has assigned 50% of the annual allocations to the regions. This money should reach its intended recipients without delay, it should be promptly distributed to the agricultural producers and managers. We must keep an eye on this process.

The competitive viability of Russian agriculture depends to a large extent on how effective government support is. This is especially important now that the development of Russian agriculture is being influenced by a variety of international factors and Russia’s commitments such as its membership of the World Trade Organisation and participation in the Eurasian Economic Space project.

The government must continue its comprehensive support of agriculture, while also counting on the regional authorities, local producers and the business community as a whole to show equal responsibility. Without increasing the efficiency of agricultural production it will be difficult to ensure the competitiveness of our domestic products, and hence the level of development of the regions, and ultimately the food security of our country. Therefore, it is important to learn to use the instruments we are introducing today. By this I mean risk management instruments. A government sponsored system of crop insurance should become operational this year. According to reports, the legal framework for this system is already in place. I myself signed the relevant law last year.

In fact the terms we are offering are unprecedented, with the government contributing up to 50% of the insurance premium. I would like the governors to give more attention to his project so that they won’t have to get together any missing amounts in a hurry at the last moment. I am referring to budget funds. They should immediately notify the Agriculture Ministry of any problems having to do with insurance that might arise, and the Federal Financial Markets Service as well, because the issue at hand concerns insurance.

Another important natural practice to minimise risk is soil improvement. This year, the federal government will provide 2 billion roubles to restore local soil improvement systems. We have discussed this with most regional leaders, and we have agreed that each region needs to plan this work and determine the local needs. I understand that this money will not be enough to cover much of the work that needs to be done. But they also need to assess and use their own resources, especially considering the fact that over 50% of the existing soil improvement systems are worn out.

Finally, I would like to say a few words about livestock breeding. I recently spoke about this in the Kremlin and the State Duma. I mentioned that long-term investments have produced very different results across the industry. There has been good progress in poultry and pig farming – these segments are in fact the best performing ones. I would say in some cases, the results are simply brilliant.

 The situation with cattle is still not simple, and may become one of the most important objectives in the near future. What I mean is an increase in the production of high-quality beef. We have all the necessary elements to accomplish this, such as pastures occupying up to 70 million hectares, vacant plough lands, and livestock breeding technologies that should be developed and that require additional efforts. And, finally, there is a loan issuing system, and a system of state support, which has been streamlined over the past few years. It appears that the loan issuing system is plagued by certain problems. For that reason, I suggest starting a serious discussion on this subject. A meeting should be held on this issue in the near future in one of the Russian regions. So if anyone has the desire to invite us for a conversation, I promise I will try to find the time and come in order to begin the discussion.

Now I give the floor over to Viktor Zubkov. Mr Zubkov, please.

Viktor Zubkov: Thank you. Mr Medvedev, heads of the regions, colleagues, the government is constantly monitoring seasonal field work and the development of the livestock-breeding sector. We have overcome the consequences of the major drought in 2010 and have restored production in the crop sector and in livestock breeding. Agricultural producers have improved their performance.  

 Last year we managed to achieve a 4% inflation rate for food prices, the lowest in modern Russia. This year, the spring farming work is progressing smoothly. We plan to develop nearly 51 million hectares over the course of the spring, which is slightly higher than last year. In addition to winter crops, the total developed area is 78.3 million hectares. We plan to extend the grain area by 2 million hectares. The winter crops are in satisfactory condition. We preserved nearly 15 million hectares out of 16.1 million hectares of winter crops, which is 1 million hectares more than last year. We lost around 8%, according to statistics records. We will reseed this land with spring crops.

Despite the fact that this year the spring sowing started two weeks later than usual, the sowing is progressing more quickly than last year, with the fastest sowing occurring in the Volga and Southern federal districts. There is a slight delay due to weather conditions in the Northwestern, Siberian and Far Eastern federal districts. These regions must therefore utilise additional resources to speed up the spring sowing.

As of today, nearly 24 million hectares have been developed under spring crops across the country, which is almost five million hectares more than last year. In fact, half of the areas planned for sowing have been developed. We have put more land under grain, sunflowers and corn than last year. The farming producers are again interested in producing rapeseed and soya. Some 900,000 hectares have been put under these crops. Sugar beet has taken over 1 million hectares. The sowing of this crop has been completed in several regions. Some 142,000 hectares were allocated for potato and nearly 40,000 hectares for vegetables. As I said, the sowing is progressing smoothly. The weather, however, is testing the farmers. Last week I visited Kuban. I toured the fields and had a look at the condition of spring grains, sugar beet and other crops. Unfortunately, it has not rained for over a month in the area. The soil is dry and cracked; the moisture in a one-meter layer of soil is down to less than a half. The lands under development are virtually deprived of water. Considering these facts, the crops are of course depressed. This is true not only of Kuban but also of a number of neighbouring regions. It must be noted that the farming producers are applying every available technology, but what is happening is further confirmation that the regions should employ modern irrigation technology and should have their harvest insured.

The weather conditions have not allowed for resowing grain thus far. I think we do not have to lower the planned indicators for the grain harvest. The farmers have all the necessary resources and equipment for the spring sowing. Fertilisers are provided by plants for the prices fixed in the agreements between the Association of Fertiliser Producers and the Union of Farming Producers.

This year is the first time that we are going to use more fertilisers. We will use nearly 3 million tonnes (2.4 million tonnes were used last year). The Federal Antimonopoly Service reports no restrictions in the supply of fertilisers.

As you know, there is a discount for fuel and lubricants sold between March and June fixed at 30% of the wholesale price. The required agreements have been signed. It must be noted that in April there was a 40% discount for diesel fuels in some regions.

The fuel and lubricants are being supplied according to schedule. In March, the demand was slightly lower than expected, partially because weather hindered the field work. In April, the demand reached almost 90% of the expected figure. We expect it to reach 100% in May.

There has been no decision regarding fuel discounts for the second half of the year. I have instructions regarding this matter. The ministries, however, have not offered their common decision to the government. I held a meeting on this issue yesterday and gave the ministers ten days to submit the resolution to the government.

The regions have been fully provided with the seed grains, including some stock seeds. The farming equipment is being upgraded.

 In addition to its current operations, Rosagroleasing is implementing an equipment replacement programme on favourable terms launched earlier this year that involves no pledge and a deferred down payment. This is very important. Almost 9 billion roubles have been allocated for the programme, and the first 2,000 pieces of equipment have been leased to farmers.

We are focusing on funding as well. As you said, Mr Medvedev, 46 billion roubles will be allocated from the federal budget for crop husbandry in 2012, including 6 billion for support for agricultural insurance.

We have been testing a new mechanism for wiring subsidies to insurance companies directly from the budgets. This will make it possible to avoid covering the subsidised half of insurance payments and to expect compensation. I can say that the banks have been prompt in granting favourable loans for seasonal operations. The lag last year (that you mentioned, Mr Medvedev, in connection with the crediting) is not dangerous. 2011 was a very successful year: we sold 25.1 million tonnes of grain to customers abroad for a fair amount of money. The gross agricultural yield grew by 24%, bringing in additional revenues.

It's just that some customers make do with their own funds and abstain from borrowing, although the 2012 spring sowing applications, on the order of 60-69 million roubles per applicant, have been passed along to the Russian Agricultural Bank (Rosselkhozbank) and Sberbank and will be honoured.

Dmitry Medvedev: I’ve consulted my briefing and it says that the Russian Agricultural Bank is in arrears for almost 30%. I admit that this could be because some producers have funds of their own, but to my mind, the banks must still pay attention to this fact. I don’t see the top bank officials here, but I’ll bring them with me when I travel to the region.

Viktor Zubkov: The bank officials are away on business trips.

Dmitry Medvedev: Then let them come back and start working on the farming sector.

Viktor Zubkov: All right. Animal husbandry is a crucial industry that determines the level and development rates of the agricultural sector as a whole. This industry creates much added value and a lot of new jobs. Between 2005 and now, we’ve managed to increase fowl meat and pork production manifold. Efforts are being taken to stabilise and promote beef production. Even though this is a high-cost affair involving protracted pay-back periods, we have obtained the first positive results. The cattle population increased in 2011 for the first time in 20 years. There is a good potential for building up production. The market situation is favourable and we have sufficient land reserves. We have been building both major complexes like the one in the Bryansk Region as well as family farms. The beef production project we are implementing in the Bryansk Region is the biggest Aberdeen Angus project in the world. Miratorg is capable of producing 50,000 tonnes of beef, which is a huge amount. But we are planning it as an interregional project that will cater not only to the Bryansk Region but also to the Smolensk, Kaluga, Orel, and Kursk regions, that is, a territory measuring as much as 1,000 kilometres in radius. This agricultural holding company will hand over cattle to farmers for nursing. It's possible that prospective beef production may reach 130,000 tonnes – this is a major project.

Another important point is that 200,000 hectares of land is being utilised that was never used before, and I'm referring the Bryansk Region alone. In this way we can put to use fallow lands in other regions as well.

It’s a promising direction for the regions located within the radius I have just mentioned. But it is also a promising proposition for the Non-Black Earth Area and Siberia. Beef cattle breeding will enable the regions to increase the general effectiveness of their agro-industrial complexes, put to use arable land, and address their social problems.

Our task is to upgrade the quality of management of this industry. That's all I have to say about this issue, Mr Medvedev. Thank you.

Dmitry Medvedev: Thank you, Mr Zubkov. Now let's hear from the regions. I’d like to switch in Tambov and then Rostov.

Oleg Betin (head of the administration of the Tambov Region): Mr Medvedev, thank you. Allow me report that we have sown more than 90% of spring crops. The work has proceeded according to plan, with some minor adjustments. A hurricane hit this area not so long ago, forcing us to re-sow part of our sugar beet fields. Areas that have been released will be sown with corn and other feed crops. This work will be done in accordance with the earlier plans.

We sowed our winter crops on naked fallow land and therefore sustained only minor losses. This spring, though it was belated, was very successful, particularly April. But this May is a dry month: we had only 5% of the regular rainfall during the first ten days of May. The average temperatures are 4-5% higher than usual, thus precipitating ripening and draining the soil of moisture. We are facing increased risks as a result, which are leading to various harmful developments. We’ve been treating the winter crops against all pests. I have to tell you that grain crops have already been treated and where the risk was great (and we conduct daily monitoring, especially in the risk zones) such treatment is being conducted today. And we have treated with herbicide all the grain crops, the first treatment of sugar beet, we have started treating sunflower. In short, intensive work is under way and we hope that if the weather is good the harvest will be good too. Regarding fertilisers, I can confirm what Viktor Zubkov has said, namely, that prices will grow in accordance with the agreement, within the set limits. We would like to thank the farmers and the ministry for the agreement that has been made and monitored.

Regarding banks, you have, Mr Medvedev, expressed concern that banks have not increased their lending compared with last year. But I have to say that we have received about 30% more in loans, both short-term and investment loans, and Rosselkhozbank has done a good job this year.

Regarding Rosagroleasing, a programme for trading in old machinery has been adopted. It has been fulfilled and all the new machinery that has been delivered was already used in the spring sowing and will now be used in harvesting, that is, everything was done expeditiously and, most importantly, the machinery has been delivered.

Another positive development is the reduction of electricity prices. We like to speak about “increases within inflation or above inflation.” Today electricity prices in agriculture are 14% lower than last year, the first such heartening development. This is the result of new rules for calculating prices that have been introduced.

On fuel and lubricants, all the problems have been solved. The only thing is… Viktor Zubkov today spoke about the second stage: no final decision has yet been made on harvesting and on subsidising fuel and lubricants prices. I think it would give a boost to farmers. The issue was discussed whether it should come in kind or in cash in the form of subsidies. If think both mechanisms are acceptable. Perhaps we should consider a scheme whereby distribution is based not on each hectare of ploughland, like today, but on output in order to stimulate intensive forms of work and more accurate reporting from farmers on the size of the crop, especially since this promises to be a difficult year.

Crop insurance. Mr Medvedev, you signed a law when you were in Michurinsk. We are acting on it, but frankly, things are moving slowly. Contracts are being signed, seminars, meetings and workshops have been held after the sowing. The agriculture directorate has appointed all its employees to be in charge of zones comprising five regions each. But the force of inertia is strong. We suggest the following to accelerate this work. Today the Agriculture Ministry issues subsidies through regional budgets. That’s for short-term and investment loans. I think they should be made available only to those producers who will insure their crops to minimise risks, and lending institutions will issue loans for the payment of insurance premiums if crops are insured with the future harvest as collateral. So, if this mechanism is introduced we will encourage this approach, perhaps not immediately this year but starting next year, and we could introduce the mechanism of civilised insurance with state participation, something you have mentioned. And starting January 1 we will introduce animal insurance with state participation, and everyone should be mentally prepared for that as well.  

Land reclamation. The land reclamation programme is excellent. The programme is important for the regions and it is getting under way. We have also filed applications. Of course 2 billion is not enough. Many proposals are coming in. The risks are high, and business managers have developed a taste for this work and want to produce not only vegetables – potatoes – on the reclaimed land, but also sugar beet, because last year’s experiment has shown that the crop, especially in drought years, is bigger than expected.

And I have a request to make. It’s about livestock breeding. Today the profit tax for producers is zero and it will remain zero until January 1, 2013. You know, this is a good support measure, especially for big companies that invest in development and turn a profit and use it for capitalisation. Such a mechanism, if preserved in the coming years, would enable agriculture to develop intensively.

Speaking about livestock, we are planning to increase meat production by about 80% this year. The output so far is not large. During your visit I asked you to support some of our projects. I have done some work during the past two days: I met with Dmitry Kozak, visited the Ministry for Regional Development and the Finance Ministry. We have reached a good working solution and I am grateful to everyone involved. We expect that with these projects (and some others) in addition to what we will produce this year, we will introduce new capacity and double meat production next year. We will make a presentation of the Tambov Bacon project in May. I invite you, Mr Medvedev, to hold a meeting or to launch the campaign. We are starting a campaign to produce 90,000 tonnes of pork in May. Thank you.

Dmitry Medvedev: Thank you, Mr Betin. We did indeed discuss several topics, including agriculture, during my visit. Several projects in your region are making good progress and in general you set a positive example.

Regarding the issues that you have raised, the supply of fuel and lubricants for agriculture, of course I will sign such an instruction after the conference call so that the picture for the second half of the year, considering the forecast of fuel and lubricants prices, and the level of consumption, is clear.

On insurance, you said that things are not moving fast enough and so far inertia is strong. Unfortunately, that is true, which is why I raised this topic at the conference call today. I think your idea of tying subsidies to crop insurance is basically sound. I am not sure whether we can implement it at once, but it looks absolutely reasonable because if one gets state subsidies, we are entitled to expect that risks will be insured. Perhaps we should outline certain stages, but on the whole I would go along with this idea.

As regards funding for land reclamation, I mentioned it in my opening remarks. We understand that frankly the sum is not smallish but downright insignificant. But one has to start somewhere. And second, various instruments should be used in order to get land reclamation projects off the ground in various regions. It should not be funded only with federal money: regional resources should be found and, of course, we should try to use public-private partnership because the amount of investment in land reclamation – I don’t know, Viktor Zubkov, if you have made the calculations – but I think it runs into the tens if not hundreds of billions, 40-50 billion. So far we have allocated about 5% if not less. That is too little, but one has to start somewhere.

The last thing you mentioned was the tax rate on profits of agricultural businesses. The draft list of the prime minister’s instructions includes an item on this. I will instruct the relevant ministries, I mean the Finance Ministry, the Ministry of Economic Development and the Agriculture Ministry. Let us move on. Rostov Region, Vasily Golubev please.

Vasily Golubev (Governor of the Rostov Region): Good afternoon, Mr Medvedev. With your permission, I will report on the situation in the Rostov Region. We planned to sow 2.2 million hectares of winter crops, as of May 16 we have sown 1.6 million. The pace of sowing is higher than last year. This year 385,000 hectares more have been sown than on the same date last year. Fertiliser was introduced on 1.8 million hectares of winter crops out of a total of 2.1 million hectares. Considering the harsh winter, more than 100,000 hectares of grain crops (4.8%) and 54,000 hectares of oilseed rape have perished. The area under rape is not large, about 70%.  The main cause is freezing due to low temperatures that are unusual for our region. To preserve the targeted area under grain crops, new crops are being planted in place of the crops that perished. We expect to complete the sowing by May 25.

We have all the seeds we need. The share of elite seeds is 10.3%; the target set under the state programme is 8%. We have sown 4,000 hectares more vegetables than last year. Since April 20 a water supply system has been operating in the irrigated zone in our region because unfortunately the weather is unusually hot in our region. There has been no rain for more than three weeks. Although the full range of measures is being taken, as Viktor Zubkov has said, the crops are in a depressed condition. Specialists at our institutes believe that if this kind of weather persists for another 7-10 days the harvest, unfortunately, may turn out to be less than in 2011.

 We are faced with the spread of weeds, pests, and diseases. We continue to carry out chemical treatments against them. We have treated about two million hectares. Experts forecast the spread of pests over an area of almost 100,000 hectares, according to their estimates. This problem is under special control; the region’s budget ensures funds available to compensate the cost of purchasing means of protection. We have begun stocking feed. As regards fuel, we have enough fuel to carry out the work. There are no questions, all agreements are in effect. Fuel continues to be supplied at reduced prices, according to the volumes sold.

By mid-May, we received a total of 1.450 billion roubles, including from the regional budget, for all kinds of support to agricultural producers. Federal regional support measures do help resolve many issues and enable our farmers to carry out field work quite rapidly. However, as I already said, weather conditions are not favourable, so we actively use all agro-technical measures to save the harvest. As a result, the amount of work is increasing. With regard to the current conditions for the development of agricultural crops, I ask you to support us on a number of issues. In 2009, over 1.1 billion roubles were allocated from the federal budget for subsidies for the use of mineral fertilisers. This year, this type of support amounts to 356 million roubles. Given the current situation, the opportunities of farmers are declining to a critical level. Therefore, I ask you to consider increasing the funding in this sphere for our region this year. According to our estimates, we would like to have the 2009 volume. This will allow us to accomplish our goals.

Mr Medvedev, I have one more question. In the early 1990s, as you have already said, the area of irrigated lands in the Rostov Region totalled 420,000 hectares, which accounts for 8% of arable land. They ensured 20% of the total crop harvest. At present, the irrigated area has been reduced down to 100,000 hectares. I ask you to consider the request of the Rostov Region in the land reclamation programme to 2020. This is very important for us: we are a high-risk farming area.  And now, briefly, several issues concerned with livestock farming. The region has maintained a positive dynamics in all categories of farming sectors: meat production grew by 7%, milk production grew by 6%, and egg production grew by 5% over the four months of this year as compared to the level of 2011. The numbers of all types of livestock excluding pigs has increased. The number of pigs has decreased due to the implementation of a series of measures aimed at preventing African swine fever (ASF), and currently there are no outbreak areas in the region. I’d like to thank you, Mr Medvedev, for the fact that the federal budget allocations in 2012 for preventing the spread of ASF reached us timely and are currently being used purposefully. I also want to thank you for the state support of 2011 for cow fodder and the milk that was produced. The total support for livestock in 2011 was very substantial and amounted to 911 million roubles.    

Our region has been developing poultry farming with success: according to last year’s results, poultry meat production grew by 47% to 179,000 tonnes. We have a major Eurodon turkey meat producer, the largest in Russia and in Europe, producing 32,000 tonnes. Optifood has built six new facilities for breeding poultry broilers with a capacity of 90,000 tonnes. We continue to build facilities in the region. These include a turkey meat plant with a capacity up to 60,000 tonnes, a facility producing 20,000 tonnes of duck meat, a facility producing incubated eggs… a facility producing 250,000 pigs and two pig farms breeding 100,000 pigs. Our priority is the construction of livestock farms: starting from 2013 we plan to erect new milk farms – every year we purchase 5,000 pedigree heifers.   

Regarding livestock farming problems, I’d like to ask you to consider the following issues: long-term loans for up to 15 years for the construction of milk farms and livestock breeding farms, and federal budget subsidies for partial compensation of the cost of building utilities infrastructure for major livestock farming projects. And there is one more issue: the need to reduce the cost of connecting the livestock farms being built or those that have been built to power grids.

And a few words about insurance. Naturally we realise that the new federal law will be a powerful source of support for our people in rural areas. It will strengthen the financial sustainability of agricultural producers, and it will make it possible to spend available funds for fuel and lubricants, spare parts, seeds and mineral fertilisers. Thank you very much for that, farmers support this. In 2011, 309,000 hectares or 8% of the total cultivated land in our region were insured. As for the current year 2012, we plan to increase the pace of insurance: according to our expert assessment, at least 10% of the area under crops will be insured.  

The new terms of state support for agricultural insurance are problematic for us. These terms do not recognise complete destruction but only a 30% criterion for compensating damages. And in this respect we would like to make a proposal: to consider introducing amendments to the federal law on the delimitation of regions and percent of damage according to a climatic zone taking into account of the climatic zone in question. In addition, from 2013, these laws provide for insuring animals, which is important for our region. And already this year we will start this practice, we will actively implement it in 2012, and in 2013 and this will help us to maintain and increase livestock numbers, we are sure of that. Therefore, we would like to ask you to improve the regulatory framework on this issue.

That concludes my report, Mr Medvedev. I’m sure that the development of livestock farming is a priority in the Rostov Region. I invite you to hold the meeting that you mentioned in our region, on the Don riverbank. Thank you for your attention.

Dmitry Medvedev: Thank you very much, Mr Golubev. As far as the regulatory framework is concerned, I think it is necessary to speed things up in all areas – this is included in the draft instructions that will be signed. You touched upon some issues relating to the situation in the Rostov Region. I’d like you to work on these issues jointly with the Ministry of Agriculture and other departments. Here are our colleagues and I’m giving them this instruction in your presence.

Now a few words about insurance. You said next year you will make a 10% increase. To be honest, this is very little.

Vasily Golubev: This year, Mr Medvedev.

Dmitry Medvedev: At any rate, I’m talking not only with you now. All of you are in different positions but they are similar to some extent. You must move faster in this direction because this figure actually means that there is no growth. Even before the adoption of the applicable laws, the growth was from 5% to 10% and sometimes even 20%. You must speed up this work as much as you can.

As for the loans and subsidies you mentioned, we’ll think about them, of course. This won’t be easy. Fifteen-year loans are very long-term, but let’s see what we can do here. Please, Mr Denin, go ahead.

Nikolai Denin (governor of the Bryansk Region): Good afternoon, Mr Medvedev, ladies and gentlemen.

Dmitry Medvedev: Have you celebrated your birthday? 

Nikolai Denin: Yes.

Dmitry Medvedev: So are you able to give us an account of what you have done?

Nikolai Denin: Absolutely.

Dmitry Medvedev: Okay, please do.

Nikolai Denin: Mr Medvedev, we have sown winter and pulse crops on 250,000 hectares, as envisaged by the plan. Potatoes have been sown on 22,000 out of 25,000 hectares, not counting household plots. Last year we reached the goal set before us by Mr Zubkov during his visit and took in one million tonnes of potatoes. This year, we plan to produce 1.2 million tonnes.

Considering market demand, managers of our agricultural enterprises are putting emphasis on increasing areas under the most popular crops, such as buckwheat and wheat.

On behalf of our agricultural workers, I’d like to thank the government for the discounted fuel during the spring sowing. This was very helpful. The cost of discounted fuel was 17.3 roubles compared with 26.4 roubles for all other consumers. Using this opportunity (we are starting to stock fodder in southwestern regions), I’d like to ask you to let us enjoy this discount during fodder stocking and grain harvesting as well.

Moving on to livestock breeding, by the end of 2011 we had 213,000 head of cattle or a 17% increase over the previous year. Last year we stabilised our stock of milking cows at 95,000 head and increased the pig population by 19%.

By May 1, 2012 we had 239,000 head of cattle in all – an increase of 21% over the past year. The relevant figure for agricultural companies was 27%.

In the past year we produced 146,000 head of cattle and poultry in live weight, an increase of 13% over the past year. In the four months of this year the increase has already amounted to 15%. Our agricultural companies have produced 6,000 tonnes more milk – an increase of 4%.

Today, we are implementing more than 10 major investment projects in livestock breeding. We are doing particularly well with pig farming. I will cite several figures. In 2005 we had 26,000 pigs and this year we have 120,000 pigs – a five-fold increase.

We are doing equally well in poultry farming. In the Soviet times the Bryansk Region produced 17,000 tonnes of poultry, whereas we raised this figure to 80,000 last year. Mirotorg is implementing a project on the production of 100,000 tonnes of poultry and will complete it by the end of this year. Poultry production will have been increased by more than 10 times by then.

Of course, our biggest project since 2009, mentioned by Mr Zubkov, has been the production of high-yield beef cattle. We are carrying it out with the support of the government and Mr Zubkov personally. Affiliates of the Bryansk Meat Company agro-holding – the world’s biggest producer of Angus beef—plans to build by 2014 33 farms, a feed yard and a slaughter and meat processing complex. It has already built 14 cattle farms, 12 of which are already occupied. The plan provides for completing the construction of another 16 farms in late 2012. Today, there are more than 36,000 head of cattle at the occupied farms. Their population will exceed 50,000 by the beginning of June and top 80,000 by the end of the year. The aforementioned company has a long-term lease on or owns more than 150,000 hectares. Investment in this project has already exceeded 24 billion roubles.

Today, the company employs about 2,000, and their average salary is over 20,000 roubles (a month). Unfortunately, the average salary in our agro-industrial sector is a bit over 10,000 roubles. When this project is implemented, the company will employ more than 6,000 people.

I’d like to use this opportunity to invite you, Mr Medvedev, to the world’s biggest beef-producing farm. It is already up and running; it is not a project.

A few words about financing and lending. In 2009 our agricultural enterprises received five billion roubles worth of loans, and the figures for 2010 and last year were six billion and 10 billion, respectively. This is steady progress.

We were told about the delay in the co-financing of our agro-industrial complex from the regional budget. We have received funds for co-financing from the federal budget – 70% of the annual total. Thank you for this. I promise that we will pay our share of co-financing in May. Thank you once again.

Dmitry Medvedev: Thank you, Mr Denin. Your project is really big – I’ve heard much about it. In effect, it will be inter-regional rather than regional. We must simply get other regions involved in it. It would be interesting to see the results. Let’s see how and when we can do this. Mr Karlin, governor of the Altai Territory, please take the floor.

Alexander Karlin (governor of the Altai Territory): Good afternoon, Mr Medvedev. We are experiencing unusual weather in our region this year – spring came much earlier than usual and we had to start all field work more than two weeks ahead of schedule. But despite this we were well-organised and had enough equipment, seeds, fertiliser and fuel. Now on average we sow crops on 165,000-180,000 hectares per day.

Under the plan we must sow winter crops on 4.7 million hectares and have already done this on 2.54 million hectares – or 54% of the total.

We are going to end our field work before the end of May, except for buckwheat, which must be sown later. This is a normal sowing period – before the early days of June. All in all, buckwheat will occupy 440,000 hectares in our territory this year. We have sown grain and pulse crops on 1.710 million hectares and will soon complete the sowing of sugar beet, sunflower and flax.

We have no apprehensions about the rates of spring field work, its quality or our ability to observe the schedule. But we have one concern, Mr Medvedev – this year we have had problems with water reserves from the very start. Today these reserves are 30% less than the average for many years. We had practically no precipitation in April and just a little rain in May but not everywhere. This is why we must strictly observe all agro-technical standards and resolve problems that will guarantee the future advance of agriculture. I’ll speak about them a bit later.

Now I’d like to thank the government and the Ministry of Agriculture for fuel discounts. We resolved all issues well in advance and today our oil companies even meet us halfway. We will coordinate with the Energy Ministry the adjustments in our schedules due to the early start of the spring field campaign.

I’d like to join my colleagues and also ask you about fuel discounts for both summer work and harvesting. It is important to consider the real requirements of our agricultural workers for motor fuel.

Mr Medvedev, this year we have cooperated well with Rosagroleasing and our farmers are grateful to it. It supplied us with agricultural equipment, primarily tractors, just in time for the spring sowing. We have actively joined the programme of upgrading agricultural equipment and have received investment quotas of a little over 500 million roubles. We have allocated all of them per requests of our farmers, accommodated them with Rosagroleasing and have ordered many of the latest K-744 tractors from the Tractor Plant in St Petersburg. The plant delivered all tractors to us on time.

As for animal farming, last year we fulfilled all our commitments to the Ministry of Agriculture on all types of livestock produce. During the first four months of this year we have been increasing the production of milk and meat in live weight. Our calculations show that if we maintain these rates (and we are confident in this), we will fulfil our annual goals as well. We will produce 320,000 tonnes of meat in live weight (a 7.4% increase) and 1.48 million tonnes of milk (29,000 tonnes more than in the previous year). We are also meeting all targets on animal productivity.

Last year we were actively building and upgrading livestock facilities. We have a regional programme called 100+100. It provides for the construction of 100 dairy and 100 meat facilities during three years. Last year we built 144 facilities accommodating 69,700 head of cattle. This year we are going to construct another 162 facilities to accommodate more than 240,000 heads of various types of livestock. In this way we will guarantee the stable development of livestock breeding in the medium term. These facilities are fitted out with modern technological equipment that allows us not only to achieve high productivity but, even more important, good work conditions for our stock farmers. Last year we created 555 additional modern jobs at the new and modernised livestock farms, and this year we will at least match this number.

As for our problems… Mr Medvedev, I have a request for you. Mr Betin, my colleague from the Tambov Region, described the project that he had presented to the Ministry of Regional Development. We have a similar project called Altaimyasoprom. It has been endorsed at all levels and now we need a government decision on state support for its implementation. We would like to receive a little over 400 million roubles from the Investment Fund. This project will allow us to increase pork production by 32,000 tonnes a year. We would appreciate your support of this project, all the more so since experts have made a favourable conclusion on it.

We have already raised the issue of soil improvement here. It is especially relevant for the Altai Territory. We regularly irrigate an area of 70,000 hectares, but on 40,000 of that irrigation facilities require either repair or overhaul. Moreover, to provide enough fodder for our livestock (the bulk of the land that needs irrigation is used to grow fodder), we need to extend irrigation to another 15,000 hectares of farmland. There is a regional soil improvement programme in Altai. However, we ask the government to include financing of our projects in a federal programme. We are planning overhaul and repair projects on over 6,000 hectares, which will require 933 million roubles of government support. For our part, we have also included a contribution in the regional budget, in the amount required by the government and the Agriculture Ministry.

As to the loan resources, Altai-based producers took out short-term loans totalling 5 billion roubles for this sowing season, which is slightly below last year’s level. We are working with Rosselkhozbank as well as other banks to develop more flexible lending arrangements for farmers’ current operations and meet their demand for borrowed capital.

We received federal financial assistance in the amount of 1.5 billion roubles. At this point, producers have already received 777 million roubles, or 51.5% of the annual financing. Regional assistance is being provided within the budget and the schedule of co-financing of government support programmes. This money is being transferred to recipients without delay.

In conclusion, Mr Medvedev, I must say that if I do not invite you to visit the Altai Territory, I would seem less hospitable than my colleagues, so I use this opportunity to invite you now. The Altai Territory offers a unique opportunity to see seven different soil-and-climate zones, like a microcosm of European Russia, from the Astrakhan Region in the south to the Vologda Region in the north. We would love to have you. Thank you.

Dmitry Medvedev: Thank you, Mr Karlin.

I’d like to comment on several specific points you made during your speech, such as Altaimyasoprom. Let’s continue working with the government and the Agriculture Ministry of course, and discuss this with the Economic Development Ministry. Now, to have a complete picture of the entire country, let’s give the floor to the Amur Region governor, Oleg Kozhemyako.

Oleg Kozhemyako: Mr Medvedev, Mr Zubkov, colleagues,

This year, the Amur Region’s agribusinesses will sow crows on an area of 1.1 million hectares, up 17% (or 146,000 hectares) from last year’s level. Spring crops will be sown on 950,000 hectares, and soybean will take up 670,000 hectares, 106,000 hectares more than last year. The total grain area will reach 230,000 hectares, an increase of 40,000, also thanks to a new project: we began cultivating corn for meat and dairy farming. Farms are being provided with grain and soybean seeds – 105% and 107%, respectively. We have also supplied 16,000 tonnes of mineral fertilisers (in terms of nutrient content), 1.5 times more than last year. We have already sown spring crops on 290,000 hectares including 190,000 hectares of grains. All the seeds have gone through pre-treatment and disinfection. Our main crop is soybean, which is best sown from May 20 to June 10. Still, we have already started sowing and completed 80,000 hectares (12% of the plan). The ministry has also provided the region with 16,000 tonnes of fuel for sowing and harvesting, thanks to the government’s support.

Of course, this is not enough, because we need three times more than the allocated amounts. Mr Medvedev, soy is our main product, and we account for about 50% of Russia's total soy production (it is a source of vegetable protein for livestock production, including beef farming, across Russia). We would like you to support our inclusion in the register of regional programmes in our traditional area of soybean growing and processing in the Amur Region for 2012-2013. We have applied for this programme with the Ministry of Agriculture, but we need financial support in order to be included and receive such support, including the use of chemicals. This will help us increase soy production and produce 1 million tonnes in a matter of two years.

Earlier we discussed the issue of establishing reduced railway tariffs for the transportation of soybeans (which we do every year), only this time on a long-term basis so that we don’t have to go through the same procedure of introducing reduced tariffs each year. We are asking that they be reduced by a factor of 0.3. It proved its effectiveness: soybeans sell very well. Central Russian regions and Siberia buy it from us. Therefore, we would like to see this tariff applied from zero kilometres, not the 1,100^th km, as is the case now, because this makes transport costs in the Far East prohibitive.

With regard to beef farming, similar to other regions, we joined this program using our own resources. Last year, we imported 2,600 heads of Hereford beef cattle. They all survived the winter in open stalls (we have lows of minus 50 Celsius during the winter). This year, we plan to bring in another 3,600 heads and keep them in open stalls. We focus on cattle breeding, especially on the Amur River floodplains along the border that have not been cultivated over the past 15 years. In this regard, I would like to ask you to make us eligible for the VAT exemption on customs duty for importing breeding stock. Thank you.

Dmitry Medvedev: Thank you, Mr Kozhemyako. Let's discuss some of the issues that were raised, including by Mr Kozhemyako. I am addressing my questions to all those present here in the situation centre. Would anyone like to comment on railway tariff for the transport of soybeans? Please go ahead.

Sergei Novikov (head of the Federal Tariff Service):  Mr Medvedev, we have established exclusive tariffs for the transport of soy from the Far East to Central Russia with a reduction factor of 0.5, i.e. 50% off for shipments to distances over 1,100 km. This is absolutely the same decision regarding the shipment of grain between Siberia and the Far East and Central Russia in both directions, as well as for exports. Previous experience shows that this solution creates a fully level playing field for agricultural producers across Russia. The discount question is redundant, and we have repeatedly discussed this with Mr Kozhemyako and the Federal Tariff Service.

We believe that we should extend the current arrangements. The only thing is that in accordance with agreements on the Common Economic Space and constraints imposed by WTO membership, this issue will no longer be on the agenda beginning January 1, 2013. In the near future, we will need to develop a mechanism for using flexible tariff policies in other ways. We are already working on it with Russian Railways and the relevant ministries and departments. The key issue is to finance this kind of tariff policy from the budget, so that we don’t end up with Russian Railways paying in full for such a flexible tariff policy. This is what I have to say regarding railway tariffs.

We should look carefully at the statement made by the governor of the Rostov Region. Mr Medvedev, I just want to say it again: the decision to connect consumers should be made by regional authorities, and regional regulatory agencies should establish connection fees. So, if the governor has any questions regarding the amount of such payment, then he should first take a look at how it is calculated in his region.

At the federal level, we charge only for connecting customers to the Federal Grid Company. After all the recent legislative changes, the fee for regular connection (for the Federal Grid Company) is 500,000 roubles, 1 million roubles and 3 million roubles. These are standard payments. These figures are either the same or even lower for distribution networks. Therefore, if for some reason these numbers are significantly higher, then either the production facility needs to be relocated closer to the grid, or we are looking into a violation of the law. There can be no large fees today. We are ready to look specifically into how things are in Rostov if we receive these instructions.

Dmitry Medvedev: Please do so. I agree that it is largely a regional responsibility now. Nevertheless, since the question has been raised, please look into it, Mr Novikov.

With respect to rail tariffs, we do have commitments that we must honour. At the same time, our country is vast and will remain vast, so we should deal with these challenges even though we need to comply with the WTO, Customs Union and Common Economic Space regulations. Therefore, developing a flexible tariff policy is indeed the most important task, one that should not be dealt with by Russian Railways alone. However, we need to find a balanced solution. How much time do we have to fulfil this assignment?

Sergei Novikov: We need to come up with proposals before June 1.

Dmitry Medvedev: Well, then I’ll be waiting for your proposals. Is there anything that you would like to add, Mr Yakunin? We have not gathered the harvest yet; therefore, there’s nothing to ship yet. I know that you will step in a little later, but nonetheless.

Vladimir Yakunin (president of Russian Railways): Thank you, Mr Medvedev. I just wanted to say that you reviewed last year’s situation concerning the shipment of produce from the Altai Territory and black-earth regions and the relevant orders have been carried out. I support everything that Mr Novikov said to the effect that existing tariffs perform the functions they are supposed to perform regarding levelling the playing field for all producers in Russia.

I can tell you that the objective numbers that I have show that tariffs account for a fairly small part of the price of the final product. In particular, I can tell you that low tariffs facilitated shipments of grain, fertilisers, diesel fuel and agricultural equipment. I want to emphasise the active role of Mr Nazarov (Valery Nazarov, general director of the Russian Agricultural Leasing Company), when the Altai Territory had organisational problems with importing agricultural equipment from St Petersburg. He immediately intervened and all issues were resolved.

The production of fertilisers is down compared with last year. My experts tell me that this is due to the fact that manufacturers of fertilisers had maintenance work conducted at their production facilities. Since the governors don’t sound the alarm, I believe that this is exactly the case.

Sergei Novikov: The bulk of fertilisers were transported in December…

Vladimir Yakunin: Yes.

Sergei Novikov: …when prices were low.

Vladimir Yakunin: Yes. We don’t have any unresolved issues with the regions as far as I know. I believe tariffs were discussed in full. In preparation for the harvest, we will work with local railway authorities in order to ensure smooth traffic. I would like to hope that the grain harvest this year will be as high as last, but transporting all cargo at once is impossible, so we will plan ahead to avoid congestions. As far as I know, new grain elevators are being built in the Altai Territory and other regions. I believe that this will also help us prevent congestion. Thank you.

Dmitry Medvedev: Thank you. Elevators are being built in many regions. I know this first-hand.

Remark: In Tambov.

Dmitry Medvedev: We have been to Tambov and other places. These are innovative technologies and they are cheaper. This is not a building with three-metre high walls that once required inordinate amounts of money to build; this is the modern technology. Of course, we will continue to build elevators.

Would anyone like to add anything? Perhaps the Ministry of Finance?

Anton Siluanov: Thank you, Mr Medvedev. After we introduced the agricultural tax in 2003, we set the income tax rate for rural population at zero. We have renewed the zero rate three times already, and there is now a proposal to extend it again. It makes sense to do so, because if we want to support the farmers as we join the WTO, then we need to include tax support as well. The tax rate is established at 18% from 2013 until 2015, and then 20%.

We still have time to think – there is no need to make the decision now – about gradually increasing the income tax rate for rural workers, but at the same time providing Russian regional authorities with the right to provide tax breaks to this particular category of taxpayers. We may want to do so, because now zero income tax rates apply to all producers. It’s hard to say how effective this is. Governors know this better, because they know their enterprises and know which ones need tax breaks. Perhaps, governors need more leeway in terms of regulating tax rates, including keeping them at zero. Still, it should be done over a certain period, three years perhaps, so that farms have enough time to adapt to WTO regulations.

As for reduced fuel prices, the present-day 30% discount is at the oil industry’s expense, according to oil companies. Their profits were 12 billion roubles down in the first six months and a 16 billion rouble loss is expected the second six months due to this discount.

We should certainly take farmers’ interests into account – but is this cross-subsidising justified? It would probably be wrong to introduce quick measures and enforce free market terms in this field. Targeted subsidising of selected farmers would be much more reasonable. At any rate, such decisions should be made at the regional level and, possibly, be financed by regional budgets, considering the federal funding for the state programme, which envisages an equal approach to all.

Is that the right approach? I don’t think it works in all instances, so I believe it would be wiser to promote the project approach by supporting developing businesses that are introducing innovation technology and updating their production.

The Amur Region governor mentioned VAT exemptions, and tax breaks on cattle imports. The arrangement was used in leasing imported cattle as an anti-crisis measure. The rouble lost value during the downturn and cattle imports became unaffordable. That was why these tax breaks were introduced. We abolished them this year. It would not be justified to return to the practice now that the rouble is strong enough from the point of imports. To be honest, I don’t support the proposal made here today to preserve that privilege. Thank you.

Dmitry Medvedev: Thank you, Mr Siluanov. I will issue instructions on all points you mentioned as I have promised to my colleagues and governors, and as I have said here. I agree that it is worthwhile to recur to targeted aid where fuel is concerned and as factors affecting farm produce prices are analysed. At any rate, we should take the current situation in agriculture into account, so all these factors should be properly evaluated when we make the final decisions concerning our work with suppliers.

As for the zero income tax rate, I have said that I will sign a relevant order. In fact, this coincides with the Finance Ministry’s stance on the matter because the measure is effective enough especially as Russia is changing its foreign economic activities in compliance with its international obligations.

A propos the extension of soft VAT taxation, please note that this concerns only pedigree cattle, not the entire livestock, so it does not involve considerable amounts. That is why I ask the Cabinet and relevant agencies to analyse the matter. Mr Nazarov, please.

Valery Nazarov (CEO of Rosagroleasing): The tax breaks on pedigree cattle leasing is valid until 2018.

Dmitry Medvedev: That’s right. We must make sure that there are no discrepancies in positions. Reduced taxation does not apply to everyone; it concerns a targeted fund for pedigree cattle, and the reduction is quite small. Nevertheless, I would like the Finance, Economic Development and Agriculture ministries to look into the matter taking account of the past experience.

As I said, I will have a separate discussion with the bankers during my tour. I want a detailed report on the current situation, the reasons for the lag, and whether there are objective reasons why money is not being used. Is it due to the increase of the effective rate or to some other reasons? After all, there are different situations. As far as I know, Sberbank has the same indices as last year while Rosselkhozbank has an increase in rates.

Bella Zlatkis (Deputy Chairperson of Sberbank Board): We also have a rate increase.

Dmitry Medvedev: Good. I have received alarming figures for Rosselkhozbank. I’m not sure – possibly things have improved now. Go ahead, please.

Yevgeny Kryukov (Deputy Chairperson of Rosselkhozbank Board): Mr Prime Minister, we have issued loans worth of 45.6 billion roubles, compared to 69.2 billion last year.

Dmitry Medvedev: I have the same figures.

Yevgeny Kryukov: We have granted loan extensions on last year’s loans worth about 28 billion roubles – that is, we did not remove the money from circulation and issue new loans. We just extended the loans, which was a positive achievement. The progress has continued at last year’s pace. Our basic accountancy index is the percentage of satisfied loan applications. It is presently 87.6%, and was 97.7% last year. Mr Zubkov was right to say that we caused only a two-week delay to satisfy 3% of applications before seasonal farm work began. I think the final figure for the year will be 90%.

As for the interest rates for 12-month seasonal farm work loans, we set it at 10.75% and did not increase it. We issue loans at 9% interest for a term of 90 days or shorter.

More than that, at the latest State Duma session on the agro-industrial complex we were asked to abolish the lenders’ fees, and we did. Mr Medvedev, our annual interest rate will be 10.75%.

Dmitry Medvedev: That’s good. I suspect that it was bankers’ enemies who wrote to me that the actual rate was at 12%. However, the amount of the bank portfolio decrease contradicts what you have told us now. At any rate, I have added another item to our meeting’s resolution to take stock of the situation in the entire commercial banking network and to consider all proposals with that in mind. Let us do it at our next meeting.

I thank the governors for their invitations. If I am not mistaken, they have all invited me except Mr Kozhemyako, so I won’t visit the Amur Region.

As for the date and venue of the next meeting, I will announce them to you as soon as I set them. See you all at our next meeting.