The rules of granting subsidies for compensation of capital expenditures were revised for farmers

Pig farmers will be given the choice either to receive compensation for interest on loans, or 20% of the total capital costs for the project. For dairy farming the return will be increased from 20 to 30%.

The Ministry of agriculture has prepared new rules of granting and distribution of subsidies from the Federal budget to the regions for compensation of part of the direct costs for the creation and upgrading of agro-industrial facilities, as well as the purchase of machinery and equipment. Rules should come into force on 1 January 2017. As it was explained in the Ministry of agriculture, in fact the changes will affect two sectors: pig and dairy farming.

In particular, for the creation of pig-breeding complexes subsidies will be provided in the amount of 20% of the total amount of capital expenditures, and for objects in the territory of the Far Eastern Federal district in the amount of 35% of the estimated project cost. However, the subsidy will not be issued if the investor has already used a different measure of state support — compensation of part of the interest rate on the loan.

— The Ministry of agriculture of Russia considers it appropriate to provide investors implementing these projects, the possibility of choosing the measures of the state support in the form of compensation of interest on loans or compensation of direct costs incurred, — explained in the Department.

With regard to dairy farming, according to the Ministry of agriculture, if the amount of compensation of investment costs is maintained at 20%, the projects in dairy farming are not paid back.

— As a result of analysis, it was identified that with the existing parameters for the interest rate on the loan and compensation of the key rate the net present value of the project is positive only if the amount of reimbursement of costs for creation (upgrade) of dairy farms is amounted to 30%, — told in the Ministry.

While dairy farms on the territory of the Far Eastern Federal district will be returned 35%.

For other agro-industrial projects, which earlier could rely on compensation of capital costs, the same conditions are maintained. So, for breeding and genetic centers for rearing and embryo transfer of cattle, the share of the return will be 30% (for centers in the Far Eastern Federal district — 35%). For other objects agro-industrial complex — 20% (and 25% for objects in the territory of the Far Eastern Federal district).

Experts point out that both innovations will play a positive role in the development of industries. In particular, the head of Executive Committee of National meat Association Sergey Yushin said that he voted "both hands" for the bill of the Ministry of agriculture. According to him, pig farmers have talked for a long time about the need for the introduction of this measure of state support as an alternative of concessional lending. The expert believes that this will attract investment resources from alternative sources to Russian banks (bonds, promissory notes, shareholders ' equity, loans from foreign banks) and to accelerate the commissioning of new pig-breeding complexes.

According to general director of the consulting company Petrova Five Consulting Marina Petrova, the increase of the recovery rate of capital costs in dairy projects will promote increase of interest of investors to the sector. However, she believes that the return of capital costs alone is not enough.

— Dairy farmers need an affordable interest rate on loans, prevention of reduction in purchase prices for raw milk in the spring and summer, as well as government subsidies for the purchase of cattle. In addition, it stimulates the development of dairy farming not only in the southern regions of the country, but where the climate requires keeping animals in a capital-heated buildings, the cost of construction of which still make livestock projects non profitable, — said Marina Petrova.

According to her calculations, the increase in the rate of return of capital costs for the construction and up-grading of dairy farms to 30% would reduce the pay-back period up to 12-13 years, while now the average term is about 15 years.

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