Russia’s agricultural industry set to receive record-breaking state aid

By Vladislav Vorotnikov

- Last updated on GMT

Russia state aid unveiled
The Russian government has announced plans to allocate RUB3.42tn ($51bn) to support the domestic agricultural industry from 2019 to 2025, according to a draft decree posted on the official government website.

The majority of the new subsidies will cover exports with high added value, such as meat.

If approved, the new support program would become one of the most expensive in modern Russian history.

From 2012 to 2018, overall state aid from the federal budget to the agricultural industry totalled RUB1.2tn ($18bn), Russian Prime Minister Dmitry Medvedev told a meeting of the Federal Assembly in April.

Over the coming years state support is set to grow from RUB242bn ($3.6bn) in 2019 to reach RUB412bn ($6.2bn) in 2024, the decree stipulated.

Details of the support program have yet to be released, so it is not yet known how much money the domestic meat industry will eventually get. In the past, meat producers in Russia received from 30% to 40% of state aid allocated to support the domestic agricultural industry. 

With new subsidies, the Russian Government wants to encourage domestic agricultural producers to establish “an export-oriented commodity weight”​, primarily of products with high added value, so overall agricultural exports would reach $45bn per year, according to the decree.

In 2017 Russia agricultural exports totalled $20bn. The task to increase exports to $45bn had been earlier set for the government by President Vladimir Putin.

Direct grants for meat producers

Although, state support for the meat industry is expected to grow, it is likely to be allocated in new forms, Sergey Yushin, chairman of the Russian National Meat Association, told GlobalMeatNews​. 

“Over the past years, the government was primarily encouraging investors to pump money into the meat industry. For this purpose, the authorities were allocating funds to subsidise the interest rate on loans taken under new projects,”​ Yushin said.

As Russia has reached self-sufficiency on poultry, and almost reached it on pork, there is no need for the same form of state support for both industries, according to Yushin.

“It could be reasonable now to shift to direct grants to meat companies in order to improve their production costs. That kind of support would be beneficial for export projects, because when you have lower costs basically you can be more successful on the global markets,”​ Yushin said.

Some part of the state aid could be also allocated in the form of reimbursement of the price of feed for meat companies, Yushin added.

“In addition, some money could be given to the ​[Russian veterinary body] Rosselkhoznadzor, so it could better negotiate with foreign countries about the withdrawal of trade barriers, and so promote products of Russian origin overseas. This kind of work takes money,”​ Yushin said.

The new support program still has to pass several rounds of discussions in the government, although at this point it is not expected to be significantly changed.

Related topics: Industry & Markets, Russia

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