Oversight and supervision authorities need to reduce pressure on agriculture

6 november 2018

"I've been studying mandatory requirements of oversight and supervision bodies for over 2 years and what I see is that the main problem is that mandatory requirements are often obsolete, excessive or too burdensome for business. We need to revise them and eliminate excesses," said Mikhail Pryadilnikov, Deputy Head of the Analytical Center, as he opened a meeting of the subgroup for cluster policy in territorial and industry projects deveoted to agriculture, green bio-technologies and agricultural machine engineering.

Experts estimate that there are some 2 million mandatory requirements in Russia and the state spends 1.5% of the GDP to audit them with another 6% of GDP being spent by business to ensure compliance with excessive requirements. Agriculture is supervised by three regulatory bodies, the Agricultural Supervision Service, the Natural Resources Supervision Service and the Consumer Supervision Service. What this means in practice is that farmers often have to deal with overlapping and excessive requirements. For example, the Agricultural Supervision Service has a check list consisting of 360 points for auditing cattle farms. The agricultural sector is also having major problems with raising loans on account of high interest rates, obsolete technologies and under-developed infrastructure.

Agricultural companies also point to numerous contradictions in the legislation when two regulations clash with each other.

"From the moment the Soviet Union collapsed, a lot of the farmlands under state control have overgrown with trees while on paper these lands are still accounted for as farmlands. Today some agricultural companies and farmers have gained control or purchased such lands. And now the Agricultural Supervision Service comes along and sees that out of the 60 hectares of these lands the farmer is only using 40 hectares while there are trees on the remaining land and the Agricultural Supervision Service fines the farmer 400 thousand rubles and the second time around they fine is even greater. After a third audit the entrepreneur loses the land. But they are physically unable to uproot the trees because in order to do that they need to get a felling ticket and complete a long and tortuous procedure to get the permission to cut down the trees even though it is their land that they are the legal owner/custodian of," says Vyacheslav Chukanov, the CEO of AO Development Corporation of Tambov Region

Meanwhile, the agricultural sector has a huge development potential. According to the Federal Taxation Service, in terms of the number of registered jobs, agriculture has a 10.5% share of the country's global economy, in terms of added value created - 3.1% and in terms of registered companies - 1.68%. Today agriculture and the related sectors are growing, albeit at a modest rate.

Participants in the conference discussed 2 initiatives that may become the cornerstone projects of the road map to ensure sustainable development of the non-raw materials sectors of the economy.

Thus, a meat producing cluster is to be created in the Republic of Kalmykia. At the moment the region is a leader in cattle breeding. There are 2053 cattle breeding company operating in the region, however, it lacks capacity for primary meat processing, forcing the farmers to sell their cattle to neighboring regions at very low prices.

The Tambov region has traditionally been a region with a predominantly agrarian economy and development of the agricultural sector has now been recognized as a top priority for the region. A cluster of crop producing companies is to be created there. At the moment the regional government is creating a favorable investment climate, efforts which have already resulted in a sustained growth in investments in the agricultural sector.

However, a number of measures need to be implemented to encourage the development of priority projects and tap the potential of the agricultural sector in the region.

"We deliberately identify major projects to use them as examples to show what kind of results we want to see in business, the economy and our budget revenue. Our goals in the development of the road map is to reduce business costs and risks of entrepreneurship while spurring demand And, most importantly, we need to see a radical reduction in the pressure on business from supervisory authorities, " explains Anastasia Alekhnovich, Head of the Expert Center of the Presidential Representatives for the Protection of the Rights of Entrepreneurs.

The office of the residential Representatives for the Protection of the Rights of Entrepreneurs has developed 10 key solutions to stimulate the industry. The experts are proposing to:

1. Step up efforts to expand the use of state-owned lands.

2. Limit the growth of the cadastral value of lands and land rents.

3. Launch a large scale program to offer cheap loans in the agricultural sector (including through leasing, factoring and other instruments), create a land bank.

4. Boost the efficiency of state and regional programs aimed at supporting agricultural producers.

5. Carry out a campaign to financially revitalize the agricultural sector (which should include an analysis of the current efficiency of businesses operating in the sector)

6. Encourage private investments in modern technologies needed by the agricultural sector: in selection, genetics, veterinary sciences, soil research etc.

7. Encourage the creation of new production facilities for deep processing of agricultural raw materials

8. Tap the potential of market niches in which Russia can quickly become a global leader: aquaculture and organic farming.

9. Make cooperation and small farm production development priorities. Create a system for procurement, processing and selling of products for small agricultural producers.

10. Reduce the administrative pressure on business and make sure its costs of compliance with mandatory requirements do not increase.