Andrei Biryukov
Import tariffs on agricultural equipment to be increased
No demand for the company's products, personnel on vacation, the working week cut down to three days, these are the typical symptoms of Russian companies damaged by the global economic crisis. Prime Minister Vladimir Putin not only makes out "prescriptions" from the Government House but pays visits to the "diseased" as well. Last week he visited the NPO Saturn and Avtodizel, the latter part of the GAZ Group. Last Thursday, he arrived in Rostov-on-Don to support a major farm equipment manufacturer, the Rostselmash plant.
The enterprise accounts for 17% and 65% of the international and domestic agricultural equipment markets, respectively. Currently, the Government has only three options: state involvement with ownership capital, loan support and virtually prohibitive import tariffs on farm equipment, with the third option taken for the Rostselmash.
Last Thursday, Konstantin Babkin, Board Chairman of the Novoye Sodruzhestvo industrial union, which includes Rostselmash, and Natalya Portasova, Agromashholding President, accused a number of regions of purchasing foreign-made equipment with budget money. Konstantin Babkin suggested that the Government come down hard and recommend that regional authorities give up spending budget money on foreign models and introduce import tariffs or a quota for harvesters.
Other possible measures include refunding of the Rosselkhozbank ownership capital to revive the demand for the agricultural equipment and adjustment of tax legislation. "This will determine whether we will see a 50% or a 20% decrease, and that is normal amid current developments. When conditions change, we will be able to make a major leap forward," Konstantin Babkin concluded.
To avoid being accused of protectionism, he cited the EU's Assistance for East European Countries programme, which envisaged a 50% reimbursement of equipment price paid by buyers of European-made machinery.
Konstantin Babkin was supported by Agriculture Minister Alexei Gordeyev and Industry and Trade Minister Viktor Khristenko.
Vladimir Putin was deliberately attentive to every speaker and announced the anti-recessionary package afterwards, including an additional 25 billion-rouble loan to Rosagroleasing and interest rate subsidising. The most important item was that the Prime Minister said, "Sure, we can't afford to completely seal off our domestic market from foreign models." After a theatrical pause, he concluded: "Amid a crisis, I consider it feasible to keep supporting the domestic farming equipment manufacturers for nine months as a provisional measure and increase import tariffs for new and used equipment. The rate will be at 15%, but not less than 120 euros for one kilowatt."
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ALARMING CALL
The motivation for Vladimir Putin's personal visit to Rostselmash was the telephone calls he received from the company. At a regional anti-recessionary council session in early last November, Rostov Region Governor Vladimir Chub announced that more cases of nonpayment and personnel cuts had been registered. Rostselmash alone laid off 1,300 employees. The falling demand for harvesters has forced Rostselmash to adjust its production plans for next year, with the projection dropping from 7,300 harvesters to 5,000. Unlike the 20% growth in the farming equipment market in 2008, this year could see a 50% decrease.
Yesterday, Vladimir Putin could see that Rostselmash had storage lots full of hundreds of brand new harvesters crowding the plant premises. "The enterprise is just filling its storage yards," the Prime Minister concluded during the meeting "On Measures to Improve the Situation in Agricultural Equipment Production."
