RBC Daily: "Putin’s discount"
Agricultural producers to receive fuel at 30% off.
The government continues winning political points with the public at the expense of the oil companies. Yesterday Prime Minister Vladimir Putin promised the agricultural industry that this year they will be able buy fuel and lubricants at 30% off instead of the 10% discount of last year. Overall, the oil companies could lose as much as $1 billion dollars as a result.
Putin made this princely concession to the agriculture industry at a meeting on livestock farming. He promised to triple the discount on fuel and lubricants relative to the previous year. "As before, farming will be able to take advantage of this discount for spring field work. Starting on January 1, the discount will be 30% off the price of fuel and lubricants in each region." The discount is on the wholesale price rather than the retail.
Supplies of discounted fuel and lubricants will be increased by 10% over last year. Farmers have enjoyed discounts since 2009, but the discounts hadn't exceeded 10%.
The Ministry of Agriculture confirmed to RBC Daily that at the end of last year it forwarded proposals and calculations on these discounts but that "it was Vladimir Putin personally who made the final decision." A source at the government reported to RBC Daily that the oil companies agreed to the 30% discount at meetings on January 10 and 17. "All the major oil companies are taking part in this initiative," he added.
Lukoil confirmed that the oil companies had met with the government on discounts for farming and that it participates in this initiative every year. Lukoil officials said that compared to the price in November 2010 prices were 10% lower but compared with the prices established last spring, the discount amounted to about 30%. Other major oil companies did not comment on Putin's initiative yesterday.
According to the calculations used by Putin, a litre of petrol or diesel fuel will cost farmers 16 roubles or half the current retail price. And, again, the availability of discounted fuel will be increased by 10% over the past year. In 2011 the discount allowed agricultural producers to save 18.5 billion roubles. Their savings in the first half of this year will amount to 12.2 billion roubles.
Last year Russian farmers purchased 2.7 million tonnes of discounted fuel, whereas this year they will buy three million tonnes. Uralsib Capital analyst, Alexei Kokin, calculated that given the current prices on summer diesel fuel (about 25,000 roubles per tonne), a 30% discount would allow farmers to collectively save 23 billion roubles (about $800 million at the current exchange rate). These savings will grow to one billion dollars with the expected fuel price hikes, the expert added.
This is the second recent freeze in fuel prices. Earlier, the government agreed with the oil companies that they will not raise retail prices on petrol before the elections. This agreement will cost them an estimated five billion roubles.
Yelena Shesternina, Yekaterina Safonova and Galina Starinskaya
