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- Investment Projects
Over the past two years, food imports to Russia decreased by 38% – from 43 to 26 billion dollars. And if the state support of domestic agriculture will remain at the same level, then in five years, the volume of agricultural products and food exports and imports will be equal and reach about 22 billion dollars each.
Aleksandr Tkachev, Russian Minister of Agriculture, has shared this information recently. He has also noted the achievements of the Russian AIC in various fields.
– We register the growth of investment activity in the field of vegetable production. Last year we selected 25 investment projects aimed at the creation and modernization of greenhouses. This year, it’s planned to build at least 260 hectares of greenhouses, which will increase the production of greenhouse vegetables by 100 thousand tons. But, of course, these rates are not enough if we want to close this position within five years, – he said.
According to the Minister of Agriculture, to implement import substitution, it’s essential to increase greenhouse tomato and cucumber production by 1 million ton by 2020, that is by 200 k tons annually, that requires 2k ha greenhouse complex construction and modernization within next 5 years. The accelerated development in that sphere is hindered, among other things, by high power tariffs – from 2 to 6 RUB/KW (varies in different areas), as the greenhouse complexes are one of the most power-consuming industries. Currently the investors reduce the tariffs to 2 RUB due to the industrial gas power generation, however, it results in 30 – 40% project cost growth.
The goal of the Ministry in this context is to minimize power expenses. Preferential prices on electric power will not be the substantial burden for the energy industry, as agriculture consumes only 1,5% of total demand.
Meat production demonstrates the positive dynamics – basically driven by pig and poultry farming. The growth for 2016 is predicted at 6,2%. The recent rapid growth of the meat industry has stimulated Russian poultry and pork exports gain: 5 months of this year have resulted in threefold export growth amounting to 43 thousand tons. Consequently, one of the major priorities for the Ministry is export support and domestic products promotion to the external markets. As we assume, by 2020 cattle and poultry production for slaughter will increase by 10% and achieve 15 million tons.
One of the challenging industries at present, according to Aleksandr Tkachev, is milk production. Notwithstanding the support measures taken for the dairy cattle breeding, the situation remains problematic with lack of progress, while dairy import substitution requires a 7-million ton milk production growth by 2020. It would stipulate extra investments and state support for construction and modernization of 1 million cattle stalls and would ensure beef production intensification not only based on specialized beef breeding, dynamically developed in recent years, but also on dairy cattle breeding.
Minister of Agriculture is absolutely sure that maintaining the current funding amounts and government support measures for dairy cattle breeding will provide one million ton milk production capacity growth by 2020 instead of the required 7 million.
– We have to review approaches to this problem, – he noted. – Last year the agricultural sector profitability in general exceeded 20%, referring to pig and poultry farming as well as other fields. At the same time the profitability index in dairy industry was 3,5 times lower, that is 5% lower even with subsidies. So, it Is not attractive for business, especially due to the long payback period.
The major cost-efficiency driver, in opinion of Aleksandr Tkachev, is raw milk procurement price justification for agricultural producers. The average milk price in 2016 has amounted to 21 – 22 RUB in Russia, while in some regions it is even lower – almost 15 RUB. Whilst the reasonable price range should be 24 – 25 RUB.
– We are in progress of developing a series of price growth stimulating actions, primarily the procurement price, particularly by means of milk intervention mechanism. We are involved in collaborative work over introducing this mechanism. A number of Government resolutions, including law amendments are needed, – Minister informed. – We also strive for dotation on milk support system modernisation. There is a lot to be made.
As Aleksandr Tkachev believes, all the above mentioned plans can’t be implemented without achieving some indicators and goals.
– The farmers need access to credits. We anticipate the agricultural enterprise-oriented privileged credit mechanism to launch on 1 January 2017 for attracting short-term and investment loans at a rate not exceeding 5% per annum, – he said. – This is a good signal for investors. It is clear that this will eliminate the red tape, and the banks will also get great opportunities for selecting better projects, more beneficial and attractive.
It is important to keep the funding volumes – 237 billion RUB. If the finance reduces, the investors will refuse to implement the agrarian projects and the accelerated import substitution goal will not be reached. Furthermore, decline in production is possible in this context, but this shouldn’t be tolerated.
– 237 billion state support will ensure obligation performance and subsidize the short-term and investment credits. At that, only 20%, and this is already a good indicator, of the total financing will be spent on new projects implementation, that will provide the population with basic food by 2025, that is in 9 years, – Aleksandr Tkachev announced.
Minister has also suggested doubling the farmers’ and peasant farms’ grants and support up to 20 billion RUB.
– The people are eager to establish family and cattle breeding farms, and we are eager to satisfy their demand. Those are generally Caucasian republics, Siberia and the Far East. Those are complicated areas, and doubling the grants and support would help settle the people there, that’s worth the effort– he concluded.
source: Business and Power