Vladimir Putin's introductory remarks:

Good afternoon, colleagues,

We are at one of Russia's oldest manufacturers of agricultural machinery. I have now seen how production is organised. I have seen the equipment produced by the company. All in all, it has turned out more than six million units of equipment during the years of its existence. This year, it has produced 6,000 units, and was planning to produce over 7,000 units next year. However, it now has contracts for only 4,000 units. I will explain why.

Regrettably, what is happening here is typical of manufacturers of agricultural machinery. In October, they faced the consequences of the world financial crisis -solvent demand collapsed, and the banks restricted loans. As Mr Maltsev said (Viktor Maltsev is Rostselmash Director General), Sberbank is the only bank which gives loans to this company today. Some foreign bank affiliates also issue loans but on a smaller scale and, strange as it may seem, with higher interests rates. The sale of produce in the regions has virtually ground to a halt.

We have just seen the assembly plant - everything is packaged, all sites are filled with inventory, the plant is working for the storehouse. As a result, the funding of investment projects has been suspended. Some 1,300 workers have been laid off, although the top managers said they planned to reduce personnel by 300 workers regardless of the crisis. But they have dismissed more than a thousand as a result of the crisis.

Let's talk about Rostselmash and the industry as a whole in detail.

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Vladimir Putin's closing remarks:

Now, let us sum up.

Do you know why I have conducted this meeting here at this plant, and why I am focusing attention on agricultural machinery production?

The reason is that I understand the challenges in this industry from information that has reached the Government and the Industry and Agriculture Ministries. Alexei Gordeyev presented a table in which farm machinery producing companies were shown, and I saw that one after another was curbing production or even closing.

True, the industry has seasonal ups and downs, as we have discussed. But overall, the situation is alarming. Employees are uneasy. I talked with several workers at Rostselmash today. The prospects for their company and the entire industry worry them. They are unsure about keeping their jobs as production winds down. Their incomes are shrinking with market oversupply.

This is what I want to say in summarising our meeting. We have made initial strides in overcoming the global financial crisis - we are trying to keep afloat financially. Our support for the financial sector is the right thing and necessary but it is far from sufficient today. As you know, we have made ambitious decisions to support industry. Now we will turn to specific industries to analyse them in greater detail.

Support of essential industries is one of the Government's main duties today. Agricultural machinery production is one example.

I don't think I need to say again what this industry means to the agro-industrial complex and to farm modernisation. Engineering impacts many related economic fields as it largely determines orders for commodities and raw materials.

We are promoting other industries, too - in particular, steel production. We regret that domestic demand for steel is shrinking more rapidly than steel exports, though exports are also in decline.

As for the problem on our agenda here, the rural Russia has made considerable progress in the last few years to increase demand for farm machinery and so promote agriculture. I was happy to see new agricultural equipment today. These specialised machines have been engineered to world standards. That's what high tech is about!

The industry has been restructured with mergers and acquisitions. Small and medium-sized enterprises are making progress. Investment projects have been launched to increase and modernise production.

Importantly, all this concerns companies that survived the major crisis of the 1990s when purchases and demand for their products shrank fivefold, and even tenfold in some industries. Russian farm machine producers had to start from scratch to compete with imports. They worked in harsh conditions. That is why it would be unwise and unfair to suspend government support of farm machine production, especially with sales and loans for modernisation projects already underway. We have sufficient funds and experience to continue such support.

First, I think we should spend budget allocations in agriculture on purchasing Russian-manufactured machinery. This has been discussed today, and I stress once again that we will do so. Importantly, 70% of machinery purchases, including imports, have been made on soft credit with two thirds of the interest subsidised. Soft credit should be available only for domestically produced equipment. I insist on this.

There is an opportunity to extend farm machine modernisation programmes, in particular, by promoting the leasing market. I think we can afford to add 25 billion roubles to Rosagroleasing authorised capital. A relevant decision has been made. I expect it to stimulate sales of the produced machinery, and I insist on urgent equipment deliveries to clients.

As the Rosagroleasing manager said at this meeting, imported machines have not been purchased on federal money. This practice should be maintained. The same goes for subsidising loan interest for equipment purchases. I hope all Russian regions will work under this same format.

As for Rosselkhozbank, we have added 30 billion roubles to its capitalisation, and you have received 25 billion roubles in junior loans.

We can also discuss opportunities for collateral capitalisation. We should see how you are doing and what assistance industry is getting from you. I know Rosselkhozbank copes with its responsibilities. However, it remains in obscurity as you mentioned. Sberbank is issuing loans at 14% interest - high but passable for today - while Rosselkhozbank has not done anything yet. Work harder! If you improve, we will think about extra allocations for you.

As I have said, similar steps should be made at the regional level to promote Russian agricultural equipment sales. First of all, manufacturers should meet clients halfway - don't forget this! You should reduce the sale price of commodities standing idle in stores. What matters most now is to keep the sales market afloat and to revive working assets to continue production. Mr Babkin, what do you think of the discount rates?

Konstantin Babkin, (Board Chairman of the Novoye Sodruzhestvo industrial union): I think they should make a 10% discount. That would be fair. 15% is the affordable ceiling.

Vladimir Putin: Anyway, you consent to make discounts, and it is good. Try to influence your colleagues, please.

Second, we would continue subsidising interest on industrial modernisation loans, just as in other key economic fields. We have said this. A billion roubles will be allocated to the Industry Ministry next year. I think it is possible to earmark 300-500 million roubles for farm equipment production. Please, talk it over with the Industry Minister. The ministry should issue the relevant instructions to the manufacturers for the year. Managers should know precise figures to understand their prospects.

We will go on subsidising loan interest for agriculture. Subsidies will reach two thirds of the whole, as you know. The 2009 budget earmarks more than 30 billion roubles for this purpose.

Next, we will plan for additional measures to promote Russian exports, including export credit. Available target allocations add up to 6 billion roubles. I expect the ministry to pay due attention to your industry, and to specify affordable allocations to promote farm equipment exports.

The same concerns insurance and government guarantees.

We should certainly take stock of VAT rates. Russian manufacturers should not feel underprivileged in their domestic market when compared with foreign import brands.

Last but not least, we should not bar our market to technological import altogether. That would hamper farmers and rob Russian equipment manufactures of incentives to become more competitive. So that would be the wrong approach in the long run. What we need is a reasonable balance between Russian manufacturers' interests and agro-industrial modernisation.

Be that as it may, there is a global financial crisis. I think in this difficult situation we should support Russian farm equipment producers (with an emphasis on equipment actually manufactured in Russia) by increasing new and second-hand farm machine import duties. That would be a temporary measure-for nine months only-and it should not concern the import of components necessary to keep Russian production moving.

There is a wide range of opinions in the Government as to the amount of such support, and proposals have clashed occasionally. I think we should agree with manufacturers and establish combine harvester import duties at 15% but no less than 120 Euros per cubic centimetre of the engine displacement.

As for depreciation costs, we have introduced bonuses up to 30%, and we will consider the matter separately for each industry.