16 december 2008

Prime Minister Vladimir Putin chaired a meeting on additional measures to support agriculture

Vladimir Putin

Meeting on additional measures to support agriculture

"The entire national economy is under that burden, and it should be distributed between all branches more or less evenly. Still, we should make agriculture an exception, as in previous years, to ease pressure on it. We have agreed to subsidise 80% of agricultural credit refinancing. <...> It is necessary to regulate the grain market. For that, the Agriculture Ministry should greatly increase the effect of purchasing interventions. With that end in view, we have agreed to increase the authorised capital of Rosselkhozbank once again-by 45 billion roubles this time, after this year's recent 35 billion roubles."

Transcript of the start of the meeting: 

Vladimir Putin: Good afternoon, colleagues,

This is another in a series of meetings devoted to drafting stabilisation measures in the leading industries of the Russian economy. A few days ago, we dealt with agricultural machine building, tomorrow we are going to focus on the car industry, and today we are going to discuss agricultural problems.

I suggest that we organise out work in the following way: Mr Zubkov will be the first to speak, then our colleagues will express their opinion, and in conclusion we'll sum up the results and make decisions. Mr Zubkov, please go ahead.

Viktor Zubkov: Thank you, Mr Putin.

Today, Russia's agriculture is part of the real economy. There is always demand for its products, and this demand never falls, whether in periods of prosperity or in a crisis.

The national Agro-Industrial Complex (AIC) employs more than 6,760,000 people, which amounts to 10% of all jobs in the economy. They produce over 4.4% of the GDP. The Government-endorsed programme for the AIC development in 2008-2012 creates prerequisites for a steady development of agricultural lands, guarantees accelerated advance of all agricultural industries, and enhances the financial stability of agricultural companies.

The implementation of the national project in the past three years has enabled Russia to reap rich harvests of agricultural crops, first of all grain, and make livestock breeding more efficient. I'm talking not about a few record-breakers, but a new reality in our industry, the development of numerous efficient agricultural companies in many regions of Russia, which have achieved excellent results in a short span of time.

In many regions, the productivity of milk production is between 8,000-10,000 litres per cow.

The grain yield is 8 tons per hectare, and more. We have built mega farms and agro complexes most of which surpass their foreign counterparts. We should continue developing this trend in 2009. Otherwise all the Government's efforts over the past years will come to nothing. I'm convinced that we must do everything in our power to prevent that.

Mr Putin,

In keeping with your instructions, we have conducted a comprehensive analysis of the September-November trends in agribusiness, prepared a development forecast for 2009-2010, and indicated the amounts of the necessary credit resources for both short-term purposes (seasonal and current activities), and for investment projects.

Much has been done recently in the sphere of legislation. A draft federal law on amendments to the federal law on agricultural development with regard to subsidising interest payments on some types of investment and short-term loans at 100% of the Central Bank's refinancing rate, was drawn up and discussed with the ministries concerned.

The Government adopted Resolution No. 918 of December 8, 2008, which provides for cuts in tariff quotas on poultry imports next year by 300,000 metric tonnes, and also for an increase in the off-quota duty on pork imports to 75% of its customs value, and on poultry imports to 95%. The Government also adopted a resolution including milk powder into a list of products to which purchase and consumer interventions could be applied. We realize the importance of this issue in the period of milk surplus.

Last night, Mr Putin signed all the four resolutions on milk regulations in accordance with the adopted law.

Now I'd like to return to loans. We have agreed with the banks on the total amount of loans for the AIC enterprises and organisations. It will amount to 866 billion roubles, including 400 billion roubles in subsidised loans for next year. We need 200 billion roubles in short-term loans, and 200 billion roubles in long-term loans, out of which 72.3 billion roubles will be spent to complete the construction and reconstruction of 360 big dairy, pig, and poultry farms so as to replace imports of these products next year. We should discuss the programme for the construction of new animal breeding farms separately.

As for the grain market, considering the protracted reduction in the world grain prices, we should set up a grain integration fund of at least 19 to 20 million tonnes. The range of grain types should be extended in the process. We believe that corn should be included. This amount will create the required reserve of food grain in case of a bad harvest. In the future, we will be able to export grain at higher prices. In this context, as we have set ourselves the goal of increasing integration grain purchases to 19-20 million tonnes, and I'd like to ask Mr Putin to consider allocating additional funds for the charter capital of Rosselkhozbank (Russian Agricultural Bank).

To overcome the negative trends and to guarantee the implementation of the state programme next year, the Ministry of Agriculture has drafted and dovetailed measures to stabilise the AIC funding with active participation of Ministries, especially of the economic bloc. Timely endorsement of this package of measures will enable us to sustain the dynamic growth of agricultural production, provide the countryside with jobs in the next few years, keep the living standards of the population at the worthy level in the rough times, and ensure social stability.

Thank you for your attention.

Vladimir Putin: Thank you, Mr Zubkov.

Mr Gordeyev, please, go ahead.

Alexei Gordeyev: Thank you, Mr Putin.

Considering that Mr Zubkov has made such a detailed report, I would like to focus your attention on several points.

First, loans to agribusiness are critical not only for implementing the Government's programme but also for the future development of agriculture as an element of the national market economy. Half of the budget for support is spent on loans. That is why Mr Zubkov emphasised the need to resolve this problem. The figures have already been quoted.

Mr Putin, I have one more request to you. Would you please consider enabling the banks to prolong short-term loans given out this year for six months, because payments for our produce are being delayed, and this is a serious problem for our industry. I'm talking about retail networks. I hope we will return to this issue later as it is one of the main concerns for the producers.

The rich harvest is exerting pressure on the market, and prices on a number of products, primarily grain, are not quite fair. The Central Bank should change its instructions somewhat. When commercial banks agree to prolong loans, they should not be subject to tough control and should not be ordered to reserve the required amounts from their net profit.

We'd like to discuss the prolongation of deadlines for issued loans once again in the same context, and in connection with the instructions you gave at the meeting with agricultural managers in the Leningrad Region. First of all, this applies to dairy husbandry, and also deferral on principal payments. In a nutshell, everything is linked with the Central Bank's instructions.

Considering that this meeting is attended by representatives of the finance and economic development ministries, I'd like to make one more request. We need Government guarantees on the loans which will be given to strategic companies. We have submitted the list to the Ministry of Economic Development. In includes major agro-industrial holdings which shape the national market of meat, dairy, and other produce. We would like to ask you to consider their special role. Lending criteria have already been determined and we fear that in some cases strategic companies may be denied Government guarantees. We have requested 45 billion roubles out of the total sum of 350 billion roubles, if I'm correct. We are not asking for much.

Additionally, if extra-bank loans are available, such as bonds and borrowings, we'd request the Finance Ministry to consider subsidising interest payments to enable such derivatives to work in the agro-industrial sphere.

Mr Zubkov has covered virtually everything. I'd like to thank once again Mr Putin and the Government for prompt decision-making on a whole range of issues, including market regulation. We'd also like to ask you to consider raising customs duties on a number of dairy products. To put it in simple terms, we have a surplus of different cheeses, butter and milk powder in the market. The Ministry of Agriculture is ready to make a proposal to this effect.

I have already signed an order on purchasing prices of corn that established it at 4,000 roubles. Purchases of corn will start next week.

Now let's look at some measures to support the grain market. We'd like you to consider support not only for purchases but also for export. This applies to the VAT reimbursement, and instructions on it have been made. Traditional exporters should be able to get reimbursed for VAT within a month, and enjoy lower their infrastructure costs. Railway tariffs are a problem because we have to transfer grain excess from the Central Federal District to the North-Western District, and some regions in the Urals Federal Districts. They have relevant capacities and are potential consumers of both forage and food grain.

And the last point: We have discussed with the Finance Ministry the granting of Government loans to other countries for buying grain, among other things. Requests for grain have been made by a whole number of countries. It is also necessary to broaden opportunities for humanitarian grain and flour supplies to enhance Russia's contribution to combating famine. Thank you very much.

Vladimir Putin: Thank you. Colleagues, many of you represent the real economy, financial institutions, and those agencies which are linked with the AIC. Please, go ahead and let us know what you think on this score, and what proposals you can make. Some of you have already applied to speak.


* * *

Vladimir Putin's final address:

Let's finish up, but first I would like to go over some of our decisions. To begin with, I would like to say a few words in response to Mr Gref.

As I said yesterday, Russian regions will have the right to make unsecured guarantees. That will be one of the pillars of activity of ad hoc teams the regions will set up to cope with strategic company-related tasks announced yesterday. In this particular context, the matter certainly concerns strategic companies of the regional scope. As for the small business warranty fund, it has been established already and now needs funding and practical projects.

Let us sum up what we have said here. First, I congratulate you once again on this year's achievements-you and everyone who works in agriculture. Agricultural output has increased by 8.8%. That is good progress. It shows excellent performance of the agribusiness community and the entire rural population.

We have received a bumper harvest exceeding 100 million tonnes of grain. The producers of grain assure us that a yield of 80 million tonnes is guaranteed in the near future in any weather. That's impressive. Possibly, yields will even stay at the present record level. We will see. We have to work hard to give Russia enough grain and fodder, retain our export potential and succeed in new markets.

Another two million hectares of arable land has been put to use. Valery Kozlovsky, General Director of the Gorki 2 farm amalgamation, which hosts this meeting, said it had given up crop growing but has resumed it now after a few years' break on a 400 hectare plot.

On the whole, as I have already said, we owe all our achievements mainly to the people who work on the land.

Increased and streamlined Government assistance to farmers has also played its part. Profit is coming from major allocations to the agro-industrial complex on the national target project and the Government programme on agricultural development. This year has also seen extra measures for agricultural stability. In particular, 28 billion roubles has been allocated to compensate fuel, lubricant, fodder and fertiliser purchases, as we mentioned earlier. A decision was made last week for an additional 25 billion rouble allocation to Rosagroleasing.

I assume the money will be transferred quickly. The company should receive the first half, 12.5 billion, before the New Year. The allocation will promote sales, give industry a new lease of life and provide a safe start for next year. In other words, it will help overcome the main problems of Russian farm machine manufacturers.

New farm leasing terms are entering into force. They have been extended from 10 to 15 years, and advance payments of up to 7% of leased equipment cost have been abolished. Now, the first instalment should be made 12 months after equipment is received.

It is clear, however, that the situation demands that we take more steps. The national AIC, like many other industries, has been affected by the global economic and financial crisis. That applies first of all to the credit deficit and high interest rates.

The AIC has its own unique needs. The available logistics infrastructure, transport and depots cannot cope with the bumper harvest. The Agriculture Ministry is not efficient enough, either. I hope it will become more active. That is exactly what the Grain Union manager told us today. He talked about the need to increase purchases. We will do it, but the infrastructure is inadequate. We need more export-oriented elevators to store the grain we will buy as part of the intervention programme.

What we are discussing is not just anti-crisis support measures to a branch of the economy. It is our duty not to let down those who started a business in the hope of receiving Government aid, investing in new plants and borrowing to purchase cutting-edge equipment. Russian agriculture has overcome its long stagnation thanks to those enterprising people, and the rural population has grown more optimistic. There are several problems we need to focus attention on now.

First, market changes are rapid and unpredictable, so we will make our customs and tariff policies more flexible and responsive. The Minister for Economic Development is here today, so we will come back to this issue again. The Agriculture Ministry has been working hard, and everything we have said here on our relations with Ukraine in the context of Russia joining the WTO, and on other relevant matters, will be generalised and formulated quite soon. Mr Zubkov will bring it all together, and we will start the decision-making process.

The decision on new poultry, meat and pork quotas mentioned today has been signed. Our talks with foreign suppliers took six months and were very difficult. We have come to an agreement at last. Extra-quota meat import tariffs will rise substantially, while poultry meat quotas will be reduced by 300,000 tonnes, etc. The figure corresponds with annual Russian production increase. That is what we will focus on. We must guarantee that increase-it is crucial.

So it is our duty to provide sufficient funding of commenced construction and projects now in blueprints. I will mention it in greater detail later.

There is another matter we have discussed: farmers' contacts with retail traders, especially where payments for supplied and sold commodities are concerned. Such payments will be made within reasonable time. They will not be put off again and again, or agriculture will become trade's free creditor. The matter demands the utmost responsibility and relevant measures. Even those interested in the system running smoothly see how hard the job is. It requires ideas and initiatives. We may even pass a framework law to regulate such contacts.

Next, we need to retain the volume and terms of agricultural crediting. As I have said, this will promote cattle breeding, dairy production and other essential projects, and guarantee spring sowing. Agriculture needs roughly 400 billion roubles worth of loans-half of them short-term, and the other half long-term, up to 850 billion grand total. It will take 72.3 billion roubles to finish livestock unit construction. That, too, demands Government support.

We discussed a related issue yesterday, and came to an understanding with the Finance Ministry. It has been decided to analyse newly opened credit lines on construction now underway. We would join efforts with the Ministry to see what assistance banks need to go on with crediting on those lines. All construction with 2009 deadlines will finish on time. If it does not, the Russian domestic market will have a deficit. I want everyone to realise it, including farmers, bankers and members of the Cabinet.

We have determined to subsidise agricultural loans, or farm production will drop. The matter came under detailed discussion yesterday, too. As you know, subsidies presently cover two thirds of interest. The Central Bank has increased its refinancing rate, so commercial bankers are also sending rates up. The entire national economy is under that burden, and it should be distributed between all branches more or less evenly. Still, we should make agriculture an exception, as in previous years, to ease pressure on it. We have agreed to subsidise 80% of agricultural credit refinancing.

I also want to mention that we have started subsidising the entire Central Bank refinancing rate on loans to livestock and dairy investment projects. The Government has also decided that the Development Bank (Vbesheconombank) will take part in funding ambitious agro-industrial projects.

The prospects of funding new agro-industrial projects come last but not least. We will return to it towards the end of the first quarter or early in the second quarter of next year. We will see what turn the general economic situation takes before we take up the matter again. It is clear what is necessary to start those new projects, and we will analyse it in every detail. You will certainly take part. We will see what progress we will be able to make.

As for extending the terms of previous loans, agribusiness spokesmen and certain bankers say there is a relevant understanding, and bankers are willing to extend the terms. Often, that is simply not possible because of the Central Bank regulations. This is due to "bad credits" snowballing, which demands additional reservation of funds for the banks themselves.

The Central Bank deems it possible to reconsider its regulations, as its President assured me yesterday. I hope the bank will do it as soon as possible.

Next, it is necessary to regulate the grain market. For that, the Agriculture Ministry should greatly increase the effect of purchasing interventions. With that end in view, we have agreed to increase the authorised capital of Rosselkhozbank once again-by 45 billion roubles this time, after this year's recent 35 billion roubles. The money will expand grain purchasing interventions and so help farmers with sales and improve their financial standing. To be sure, when Rosselkhozbank gets this budget money, it will also be able to attract more finance and so extend its transactions.

I hope for quick and efficient work, whose effect agricultural producers will feel.

I wish you every success. Thank you.