Gazeta: "Fertilising with the Rouble"
By Maxim Tovkailo
On Tuesday, Prime Minister Vladimir Putin visited Veliky Novgorod, where he toured the world's largest plant for the production of mineral fertilisers, Acron. There, Mr Putin held a meeting on the problems facing the industry's agro-chemical sector. In the second half of 2008, its output dropped by 30%.
The slump resulted from a 20% fall in world prices for fertilisers. Forced to sell exported products at lower prices than before the crisis, the industry posted less profits in 2008 than it had planned. The depreciation of the rouble saved it from reporting zero or negative earnings. "It enabled us to show a profitability of 10% to 12%," Alexander Popov, the First Vice-President of Acron, told Mr Putin.
The main issue affecting the agro-chemical sector, as of the rest of the industry, is a lack of working capital. The Government is addressing this problem in two ways. Firstly, Acron, together with other large chemical plants, has been put on a list of strategic enterprises which the state will help in the first instance. Secondly, beginning in April, the Government will abolish export duties on mineral fertilisers altogether. In fact, there had been no such duties before 2008. The Government justified their rise last year by the need to meet 100% of home requirements in fertilisers with internal resources, and on a desire to decrease, albeit slightly, the share of raw materials in exports.
The decision to reduce customs to nil was once again passed yesterday at the meeting chaired by Mr Putin. Deputy Minister of Industry and Trade Denis Manturov put forward the case for this move. He explained to Mr Putin the need to abolish the duty, not only out of concern for the agro-chemical industry, but also for agriculture overall. Agro-industrial businesses, he said, will be able to purchase fertilisers at lower prices now. The Ministry's estimate is as follows: the main cause of mounting production costs was high-interest rate loans. Funds released by the zero customs duty and increased export revenues will enable agro-chemical plants to do without such loans.
In exchange for exemptions, the Government made the industry to promise that all its output will not be exported (world prices are 20% to 30% higher than domestic ones).
Acron Coordinating Council chairman Vyacheslav Kantor promised the Prime Minister that the industry would supply as much to the home market as it is required. "We as members of society are aware of our responsibility - this is no tall order for us, no burden," he told the Prime Minister. The Association of Agricultural Producers and the Russian Association of Fertiliser Producers have already concluded an agreement not to reduce fertiliser supplies to the home market in the next five years.
At the same meeting, Mr Manturov suggested establishing "integrated companies for the production of fertilisers drawing on state resources." "It is necessary for mineral fertiliser producers to be self-sufficient in raw materials. For this purpose, we propose that integrated structures be set up, using state resources, or state assets, such as stakes of shares or licenses for the development and production of fertilisers," the Deputy Minister said. The Ministry is yet to prove to the Government and market players the need for setting up a holding to produce fertilisers. On the whole, the idea fits into the Ministry's concept of the industry's development. Large holdings with state-owned stakes in enterprises are to be found in many economic sectors where the state has retained its presence since Soviet times.
