Governmental support

Within the recent years, the governmental support of agribusiness of Ukraine has undergone significant changes. The state support of agricultural used to be in form of small volume direct support, as well as preferential VAT regime. This in total amounted to quite significant preferences. However, in 2017 it was decided to end this format of support starting from 1 of January 2017.

Distribution of state budget expenditures for 2018 (in thsd. UAH)

Source: State budget of Ukraine for 2018

MAIN TYPES OF GOVERNMENTAL SUPPORT FOR AGRICULTURE

Price regulations. The government regulates the wholesale prices of certain agricultural prices, by setting lower and upper price limits, as well as using other measures defined by the Law “On Governmental Support of Agriculture”, while staying within the borders of anti-trust legislation and rules of fair competition.

The state price regulations are carried out through the interventions of the Agrarian Fund in volumes, which allows for setting a price range at the level, above the lower price limit and below the upper price limit. The state does not regulate prices outside the organized agricultural market.

 Objects of state price regulations are the following types of agricultural products (commodities):

Durum wheat

Meat and offal of slaughtered animals and poultry

Grain mixes of wheat and rye

Corn

millet

Barley

Winter rye

Spring rye

Pea

buckwheat

Oat

Dry milk

Sunflower seeds

rapeseed

linseed

Hope cones

Sugar (from sugar beat)

Wheat flour

Rye flour

Soft wheat

Soy

butter

Sunflower oil

For each of agricultural goods, defined according to the standards and which falls under price regulations, the lower and upper price limits are set.

For price regulations following instruments are used:

Commodity intervention. Commodity interventions are carried out by the Agrarian Fund through selling of certain objects of state price regulation on the organized agricultural market on a spot or forward with the aim of setting a fix price within the predetermined limits.

Temporary price regulation and temporary budgetary subsidies. Temporary price regulation is a set of administrative measures aimed at prevention or liquidation of speculative or agreed scheme by sellers and/or buyers to set prices, and which cannot be corrected by the standard methods of state intervention.

The Agrarian Fund carries out price regulations. This Fund is a specialized governmental institution, which is authorized by the Cabinet of Ministers of Ukraine to conduct pricing in agricultural sector of Ukraine’s economy.

Governmental pledged grain purchases. The Agrarian Fund (hereinafter – the lender) provides budgetary loans for grain growers (grain is an object of state price regulations), under guarantees of this object that issued on providing the creditor a warehouse certificate (2 copies).

Financial support of legal entities is conducted through such mechanisms as cheaper loans and compensations for lease payments. Cheaper loans are achieved through the regime of credit subsidization, in form of subsidizing a part of interest fees of loans issued by banks in national and foreign currencies. Compensations for lease payments are the partial reimbursements of leases paid by legal entities in agrarian sector for the acquisition of machinery and/or agrarian equipment under the conditions of financial leasing.

Budgetary subsidization of livestock. When planning the state budget expenditures for the coming year the Cabinet of Ministers of Ukraine make provisions for subsidizing the producers of animal products.

Державна підтримка галузі тваринництва. Підтримка галузі тваринництва, на яку e 2018 році виділено найбільшу суму з усіх програм – 4 млрд грн., направлена на створення основи для зростання галузі тваринництва, яка може генерувати продукцію з високою доданою вартістю. Дана програма передбачає фінансування ряду напрямів, які сприятимуть зростання поголів’я ВРХ, свиней та інших видів тварин, та стимулювання будівництва тваринницьких комплексів. Згідно розпорядження Кабінету Міністрів України розподіл коштів, передбачених у державному бюджеті за програмою “Державна підтримка галузі тваринництва” на 2018 рік здійснено за такими напрямами:

Budgetary subsidies for development of agricultural producers and for stimulation of agricultural production.

Agricultural producers, whose main activity is the sale of agricultural commodities produced on their own or leased assets, whereas the fraction of agricultural goods is not less than 75% of all sold goods within the previous 12 consecutive tax reporting periods, are entitled for budgetary subsidization for the development of agricultural producers and for stimulation of agricultural production after their registration by legal authorities in the Registry of budgetary subsidies recipients.