On Approval of the New State Program on Development of the Agricultural Sector

On July 13, the Government of the Russian Federation approved the State Program on Development of Agriculture in the 2013-2020 Period with federal budget financing in the amount of Rb 1,509 trillion.
On July 13, the Government of the Russian Federation approved the State Program on Development of Agriculture in the 2013-2020 Period with federal budget financing in the amount of Rb 1,509 trillion.

The disadvantage of the above program consists in the fact that it does not include the regional specifics of rural economy of constituent entities of Russia. In 30% of constituent entities of the Russian Federation, corporate agriculture with large agro-companies and agro-holdings prevails. The same percentage of constituent entities of the Russian Federation is characterized by prevalence of family farming and the remaining 40% of constituent entities has a mixed structure.

 

Simultaneously, the draft of the new State Program suggests a unified set of measures. So, most types of subsidies are of interest only to regions with intensive agriculture and favorable social conditions for development of the rural area. As regards regions with unfavorable conditions and depopulation and poorly developed territories with harsh environment, it is necessary to develop specialized social programs. In such regions, subsidies on development of agriculture and public funds are traditionally underutilized.

 

It is necessary to state that in the draft of the new state program a majority of measures distorts the market: a large number of state support funds go to companies which provide resources to the agriculture. For example, the new program - like the existing State Program - provides for subsidizing of a portion of expenses related to purchasing of mineral fertilizers. However, the above subsidy is immediately passed over to producers of mineral fertilizers and petrochemical industries. In addition to the above, payments of subsidies for compensation of costs related to servicing of long-term bank loans will be spiraling up.

 

Within the frameworks of the WTO, violation of agreements can be avoided if the policy of provision of the state support is fundamentally revised: subsidies should be granted directly to producers for buying of machinery and equipment and not by way of subsidizing the interest rate; investments are to be made in science, education and information and consulting systems, as well as in roads and development of other rural infrastructure and cooperative farming; subsidies should be granted per hectare of land and notional head of livestock and not for support of specific products and resources.

 

Renata Yanbykh, PhD (Economics), Leading Researcher of the Department of Agricultural Policy