5 march 2013

Meeting on new greenhouse technology

Transcript of the beginning of the meeting:

Dmitry Medvedev: Some time ago we came to an agreement with Mr Mitin (Novgorod Region Governor Sergei Mitin) to hold a meeting on developing modern greenhouse facilities and introducing new vegetable growing technology. Not long ago I went to Karachayevo-Circassia and visited a large greenhouse facility where vegetables have been grown for Moscow for a fairly long time – since 1980. They have their own ways of growing vegetables. But time zips along and today we are meeting at a new venue – you are using completely different, new technology. In any event, greenhouse vegetable growing is a very pressing issue for this country.

I’d like to make several points now. Everyone understands how important it is to have fresh vegetables and greens in the diet. Yet despite all our efforts, their consumption in this country is still lower than in other industrialised economies. The share of domestic produce in our shops is unacceptably small, especially in winter. Imports (everyone here understands this) are far from always being affordable and of proper quality. Some supplies are simply dangerous for the health because of excessive pesticides and nitrates. Rosselkhoznadzor (the Federal Service for Veterinary and Phytosanitary Supervision) reveals such facts from time to time. A recent incident occurred with apples from Poland and Serbia, but this is just one of those cases when we have to react to imports.

Every year about 600,000 tonnes of vegetables are grown in our greenhouses. If we divide this amount by the strength of our population (which is easy to do) we get about four kg per capita per year. Doctors recommend that we should eat at least four times as much – about 15 kg of greenhouse vegetables per year. In order to meet this requirement we should at least double the production of greenhouse vegetables and bring their gross output to 1.1 million tonnes per year by no later than 2020. We should also increase the greenhouse area to 3,000 hectares as compared to the about 2,000 hectares today. This is a difficult task considering that most greenhouses are largely obsolete, as we know from our own experience. There are different ways of assessing wear and tear but in some cases it is up to 90%. That said, the wear and tear does not even matter so much as the current performance of greenhouses. Many of them are uncompetitive because they consume too much electricity and too much water. Naturally, all this overhead is reflected in costs and eventually results in high retail prices for consumers.

The state is spending much money to subsidise the construction and reconstruction of greenhouses. So-called seasonal duties have been introduced: 15% is added to the customs costs of many cultures – onion, carrots, cabbage, beets, cucumbers, tomatoes and lettuce. Support for greenhouse vegetable growing is also provided by regional programmes. The minister will tell us how many investment projects they have had. I don’t want to run ahead – Mr Fyodorov will have his say.

Before the meeting I walked around a new enterprise – Novgorod’s greenhouses. This is a modern complex indeed. They are using Dutch technology. It's too bad this is not our technology but, regrettably, we are far behind in this respect. For the time being we should use the best that is available. We have our own equipment and greenhouse facilities, and we should try to combine our producers with foreign technology. At any rate, this is particularly important for those regions where the conditions for other vegetable-growing options are more complicated.

We should pay attention to spreading the successful experience in using energy-saving equipment and the construction of modern greenhouses with the use of modern fixtures. I’d like to emphasise once again that we should use both our own and foreign technology.

Energy supply, which I have already mentioned, is one of the most urgent issues for greenhouses. I know that agrarians complain (and this is probably the main issue) of being fined for wasted gas. Heat expenses amount to more than 35% in the costs of vegetables grown in winter greenhouses.

We should think how we can influence this situation, including possibly by changing gas supply terms. I’ll issue the necessary instruction following our meeting; and it largely concerns the coercive restriction of gas supply in cases of excessive gas consumption.

Of course, the peculiarities of greenhouse production should be considered when developing regional energy savings and energy efficiency programmes. Construction and design standards are obsolete; they were adopted 30 years ago, in 1985, although they have been slightly adjusted. In any case, life has changed much since that time. The standards should be updated. We must take into account modern energy saving and fire safety standards as well as the specific characteristics of this kind of business in different climatic and natural zones.  

Foreign experience shows that new marketing solutions are very important for the profitability of greenhouse production. It is necessary to encourage demand for national products, including under the programme on so-called public catering. And, of course, the sector needs better research and technology support, as well as modern programmes for training skilled personnel. It is very important to use the regional labour force, one’s own resources, but these should be qualified specialists. The fact is that this economy, this production is much different from what we used to have 20 or 30 years back. To look after this, to observe the correct proportions, special knowledge is necessary. I have heard a proposal to create a special technology centre – let’s discuss this too.

Those are a number of problems that I suggest we discuss today. I also want our colleagues at this meeting – heads of regions developing such projects  – to speak on their projects too.

Of course, the first presentation is from the Minister of Agriculture. Mr Fyodorov, go ahead please.

Nikolai Fyodorov: Thank you very much. Mr Medvedev and colleagues, according to the Prime Minister’s assessment and analysis, greenhouse production is not well supported in Russia. However, greenhouse production has seen a revival since 2008, since the start of the state programme and with some additional tools of state support. It became possible to subsidise interest rates on investment loans for the renovation and construction of greenhouse complexes. It became possible to subsidise purchases of vegetable seeds (up to 30%). Greenhouse farms began to enjoy customs protection. As a result, we increased protected soil from 1,800 hectares in 2008 to 2,150 hectares in 2012. The gross yield of greenhouse vegetables also increased from 520,000 tonnes in 2008 to 620,000 tonnes in 2012. But in general, as the Prime Minister said, we need to increase this several times over in order to come close to the health standards for consuming greenhouse vegetables grown on protected soil.

Currently we import the vegetables we need, mostly from China, Turkey, and the Netherlands. And a part…

Dmitry Medvedev: And what is the share of domestic production in the total greenhouse vegetables consumed in Russia?    

Nikolai Fyodorov: We produce 600,000 tonnes and we import approximately 1.7 million. We consume over 2 million tonnes of greenhouse vegetables.

Dmitry Medvedev: So imports account for some two thirds, correct?

Nikolai Fyodorov: Yes. This is rather a large amount, and we have some major importers of vegetables.

Dmitry Medvedev: It’s an enormous amount! Look, we do not import cattle in such quantities, even in comparable quantities, although quite recently it seemed that it was much more difficult to raise cattle. The current situation with pork and poultry is quite different.

Nikolai Fyodorov: Yes, it’s the opposite situation.

Dmitry Medvedev: Just the opposite. They have their problems, but we have practically ensured our security in this area. And here, two thirds are imported! Excuse me, go on, please.

Nikolai Fyodorov: In this context, indeed, since the disintegration of the Soviet Union in 1990, greenhouse areas and production had decreased. And only beginning in 2008, as I said, has there been some revival, though insufficient. And perhaps we can figure out today how to give it a jolt.

Since we are at a very modern enterprise, perhaps it is worth mentioning that some greenhouse farms have come into being due to the state programme – they have updated existing greenhouses or built new greenhouse complexes with the use of world class technology. This includes automated microclimate control systems, drip watering, fertiliser dosing systems which have been demonstrated here, as well as organic methods to protect plants against pests and diseases without using chemicals, which is very timely.  Good thing that demand from Russian citizens is growing here. On the one hand, there’s a need to increase the amount of investment in order to speed up the modernisation process and, on the other hand, this is a positive factor that makes agribusiness enterprises do their best to handle the higher demand.

Notably, the use of modern energy-saving production processes in recent years has improved the greenhouse industry’s energy efficiency. For example, the consumption of natural gas required to produce 1 tonne of vegetables fell to 4,500 cubic metres in 2012 as compared with 5,700 cubic metres in 2008, which represents a savings of 22%. The consumption of electricity was down 15% in 2012 as compared with 2008. Overall, the greenhouse industry...

Dmitry Medvedev: Perhaps that’s due to the fact that new greenhouses are more energy efficient.

Nikolai Fyodorov: That’s correct. Nothing was done to improve the energy consumption at older facilities, and 90% of our greenhouses fall into that category. However, the new ones, 10% accordingly, are changing the statistics. Admittedly, the operating condition of existing greenhouses precludes any chance of further improving their energy efficiency. Their profitability levels are below 10%. Old greenhouses average about 5,000 cubic metres of natural gas per 1 tonne of vegetables as compared with 1,000 cubic metres per 1 tonne of vegetables used by advanced greenhouses. That’s a five-fold difference.

Everyone is pointing to the fact that energy costs account for 35% to 50% of the overall production costs of growing vegetables in winter greenhouses. A lot depends on how energy-efficient the production processes are.

Despite all the decisions adopted in order to improve the situation, the terms and conditions of energy supplies remain the most critical issue in the greenhouse industry. Let me give you an example: an analysis of daily natural gas consumption showed that greenhouses use more natural gas than the average daily allowance set forth in long-term contracts, even though these contracts provide for fluctuations in such allowances ranging from ­-20% to +10%. We looked at Voronezh greenhouses in March 2012. Please note that the ambient air temperature was minus 2° C on March 6.  The daily gas overrun was about 96,000 cubic metres, or 62% more than the daily limit. On March 11, though, with the same average temperature of minus 2° C, the greenhouses used 10,000 cubic metres less than the daily limit. The greenhouse had to pay an extra 1.36 million roubles in March to cover excessive use of natural gas. There’s no way to project daily gas consumption, because even with similar temperatures there are other variables, such as wind or snow.

Remark: Or sun.

Nikolai Fyodorov: There are the factors that prevent farmers from guarantying accurate forecasting of daily heat consumption numbers, or anything else for that matter, no matter how much gas suppliers wished to have them. That is because the automatic climate control does not allow them to be off by more than one degree. If they are off by more than one degree in either direction, the system goes haywire. We have a solution to this in our draft minutes...

Dmitry Medvedev: What’s the solution, Mr Fyodorov?

Nikolai Fyodorov: I have heard people from industry associations suggesting that they should switch from daily limits to monthly limits. I think there must be a way to reach an agreement on this issue with gas companies.

Dmitry Medvedev: Let me issue a directive to this effect. We’ll need to sit down, butt heads and find a way to do this, because we’re talking about fairly small volumes here compared with the rest of the industry...

Nikolai Fyodorov: That’s correct, the volumes are not large if you look at the entire gas industry. However, it’s an important issue if we want to comply with health and medical guidelines.

Allow me to say a few words about the steps that the Ministry of Agriculture and industrial unions believe are necessary to promote greenhouse vegetable production in Russia. In order to make this industry more competitive and responsive to the needs of Russian consumers, we will go ahead and sharpen our focus on the needs of the regions and increase our support for greenhouse vegetable producers as part of regional economic programmes. We can do that using our internal reserves. However, Mr Klepach (Andrei Klepach, Deputy Minister of Economic Development) says it would be nice to add some funds in order to be properly capitalised and be able to support the targeted expansion of the greenhouse vegetable industry. However, Mr Ivanov (Andrei Ivanov, Deputy Finance Minister), doesn’t seem to subscribe to this point of view. These are the things that we need to discuss. However, the Ministry of Agriculture and the regions in question could increase the funding at least minimally. I also spoke with the Governor who is present here. They have their own programmes. We can pool our resources and do more. Some regions have even more ambitious plans to double or even quadruple their ​​greenhouse areas. These plans are absolutely realistic. We want to pool our technical and human resources and those of the Russian Agricultural Academy and the Greenhouses of Russia Association in order to create a Training and Advisory Technology Centre to provide market-based advanced training of farmers and conduct research into advanced production methods. We can use the capabilities provided by the Russian Agricultural Academy and our universities without tapping into federal funds, since we will pool resources. We have reached a preliminary agreement with them with regard to establishing such a centre of excellence and professional development.

A social grocery store system established under the government programme has been operating as a pilot project since 2005. In 2015, we will introduce this system across Russia, as we complete the transition from the yellow basket to the green one. We have preliminary agreements to pool our resources with about 10 pilot regions. They will use funds from their budgets, and we will fund a portion of the costs from the federal budget in order to get the pilot social grocery projects going. Industry associations and the Greenhouses of Russia Association are interested in growing and supplying more vegetables which we will be able to do during off-season using the social grocery system.

These proposals are included in the draft minutes. They’ve been discussed and agreed by all the participants of today's meeting.


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Closing remarks by Prime Minister Dmitry Medvedev:

Colleagues, I believe that you understand what these decisions are all about. I will now make a few announcements and comments.

We will, of course, continue to support agricultural producers via Rosagroleasing and the Russian Agricultural Bank, as the leaders of our development and financial institutions said earlier today. Mr Dvorkovich also mentioned this just now. We will provide our support to them on the conditions that have been outlined here today. This is a fair approach.

I believe that the idea about the technology centre makes sense. Speaking on behalf of the association, Mr Muravyov (Arkady Muravyov, President of the Greenhouses of Russia Association) focused on the need to establish a public-private partnership in this sphere. Private investors have a significant role to play here, because they are the ones who need it. The state is prepared to hand you a flag and discuss the shape of this flag with you. However, you are the ones who will carry it.

I had planned to make a few comments about electricity supplies to the grid, but Vice Prime Minister Dvorkovich took the words right out of my mouth.

Costs are important. Mr Betin (Oleg Betin, Governor of the Tambov Region) and other colleagues have mentioned this. You cannot build things at any cost. We all know that sometimes we do that to bolster our image or for some other reasons. You need to build things that will sell fast in a particular region. How we should go about it is a separate issue. Project financing is supposed to provide an answer.

Now, with regard to energy supplies and relations with Gazprom. These issues are included in the draft list of directives. Things that our colleague just said about special relationships with Gazprom got my attention. I will note this issue in the text of the directive. Perhaps Gazprom should use the experience gained by its Moscow enterprise and tailor it to other regions. What you said, though, looks pretty interesting when payments are made during six months and then withheld for another six months. That approach can be used in other places, as well.

Someone here mentioned that Russian-made products should be differentiated from products made elsewhere. Actually, I don't mind doing that. When we go shopping, we tend to look for Russian-made products. We do so not only because we want to support Russian manufacturers, but simply because we are more familiar with products made in Russia. You can, at least hypothetically, locate the manufacturer and take him to task for a low-quality item. As far as I understand, the Government is not in a position to issue any directives in this sphere, and this has to be done by industry associations and unions. Is that correct, Mr Fyodorov? Yes. We are ready to support you in every way to make sure that Russian brands sell better than they do now.

We have heard about the choice of construction sites today, as well. I believe this is the right thing to do. Let the Ministry of Regional Development and the Ministry of Economic Development take a look at it together with the regions. The Government has no business telling you where to build. You are better positioned to know it. Obviously, we got together today to discuss things that need to be discussed, because we were talking about the risky agricultural zone in northern Russia ... So, it is an absolutely necessary discussion. Such projects make sense in warmer regions as well. We realise that you have to decide what you are going to do next.

Several meeting participants spoke about specialists and staffing issues in general. I am prepared to give the Ministry of Education another boost with regard to professions and other problems that you mentioned.

I believe that covers the issues that we discussed today. I hope that we will be able to achieve the goals that we outlined in our 2020 programme. I think that these numbers are quite realistic. If we, the federal government, the regions and, of course, businesses - because these are your projects - pool our efforts, we'll get there. Thank you.

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