Measure seven times and cut seven times

Two divergent trends are developing in the White House regarding budget assistance to business due to the changing key rate. Thus, the Ministry of Finance naturally seeks to limit budget expenses and risks and proposes to introduce an upper limit on the lending rate, above which the budget will not subsidize preferential loans. The need for restrictions is associated with an increase in the cost of credit and potential treasury expenses – a decision that can partially neutralize the attractiveness of preferential programs and limit the budgetary impulse. The Ministry of Industry and Trade, in turn, proposes to abandon the key rate when calculating fines for failure to comply with the requirements for issuing state subsidies – it is proposed to return only part of the subsidy, proportional to unfulfilled obligations, to the treasury.

A sharp increase in the key rate and the expectation of further tightening of the monetary policy of the Bank of Russia are forcing the government to seek a new balance in providing support to businesses from the budget – the fact is that most support programs were tied to the key rate of the Central Bank and were adopted during a period of noticeably lower market rates . Yesterday, two draft amendments to regulations regulating the specifics of state support were published on regulation.gov.ru.

In particular, the Ministry of Finance has prepared changes to the calculation of the parameters of federal subsidies for interest rates on loans, bond issues and leasing agreements. The agency proposes to determine a ceiling for the final rate, beyond which subsidies will not be provided. In this case, it is proposed to adjust the range of the upper limit of the final lending rate downwards – due to the narrowing of the range of lending rates on loans provided since 2016 (at that time Resolution No. 702 “On the use of basic indicators when calculating subsidizing parameters…” was adopted, which is amended ).

The authors of the project indicate in the explanatory note that the project was required in connection with the expansion of the practice of providing subsidies for loans with a floating rate. At the same time, it is explicitly stated that the changes are aimed at “minimizing budgetary risks when implementing such subsidies.” The department believes that the changes will not affect the achievement of the goals of state programs. However, in the context of a high Central Bank rate, the availability of lending will largely depend on the “ceiling” – the decision can reduce the attractiveness of preferential programs. As a rule, subsidy programs are concentrated in sectors that are priority for the state, so it is hardly possible to talk about a complete lack of effect.

The second draft resolution was published yesterday by the Ministry of Industry and Trade and affects the interests of leasing companies and lessee enterprises. Amendments are proposed to be made to the rules for providing subsidies to stimulate demand and increase the competitiveness of Russian industrial products (Resolution No. 1908 of December 27, 2019) – they mitigate the liability of leasing companies if they were unable to fulfill the terms of the subsidy agreement when providing discounts to lessees. Now, if the business fails to meet its obligations, it must return subsidies and penalties to the budget for each day of delay – the penalties are tied to the key rate. In case of changes, the business will not have to pay any late fees: only subsidy funds will need to be returned to the budget, and then only in proportion to the failure to achieve plans. Moreover, in the event of force majeure, enterprises may not return the subsidy funds to the budget at all; previously, such relief applied only to penalties. The project of the Ministry of Industry and Trade also provides for the possibility of transferring the provision of acceptance certificates for equipment leasing. The department explains that due to the ban on the import of sanctioned equipment into the Russian Federation, light industry enterprises are forced to deliver it through “friendly” countries, which leads to an increase in delivery time or replacement of the supplier. “An analysis of law enforcement practice that determined the need to change legal regulation was not carried out,” the authors admit.

The Ministry of Industry and Trade believes that the return of part of the funds, proportional to the scale of non-fulfillment of the conditions, will be sufficient, but the current conditions may cause disproportionate damage to companies in the light industry, already suffering from Western sanctions. At the same time, the department has no plans for a frontal review of the conditions for subsidizing industry – they vary greatly from industry to industry and require individual adjustment, a source in the Ministry of Industry and Trade told Kommersant. However, the department previously proposed allowing adjustments to the subsidy targets themselves – for residents of industrial clusters (see Kommersant on September 18).

We note that a revision of approaches to subsidizing interest rates, provoked by changes in monetary conditions, may become another argument for reforming the entire state support system. Previously, the risks of a reduction in budget revenues stimulated the Ministry of Finance to develop a unified model for the competitive distribution of all budget subsidies and grants in the form of subsidies and standardize the requirements for documents used to formalize such benefits (see Kommersant on May 24 and July 12). The departments are also expecting substantive changes in the distribution of state support measures: the government’s plans for technological development will require concentrating budget assistance on general priorities, abandoning the principle of independent verticals with uncoordinated support programs (see Kommersant on September 25).

Diana Galieva, Oleg Sapozhkov