Processing asks for improvement – Newspaper Kommersant No. 217 (7418) dated 11/23/2022

Participants in the investment quota program who have built fish factories may lose their rights to the resource ahead of schedule, warned the All-Russian Association of Fish Manufacturers (VARPE). The sanction threatens for processing less than 70% of the quota catch. But with the fulfillment of this condition, business has difficulties, including due to shortcomings in the legislation. The draft law with controversial requirements will still be finalized, regulators say.

Those who built fish processing plants under the investment quota program may face early withdrawal of the resource. This is stated in the appeal (Kommersant has it) of VARPE President German Zverev to State Duma Vice Speaker Alexei Gordeev dated November 17 of this year.

The risks are connected with the bill on the second stage of the investment quota program, which the State Duma welcomed in the first reading at the end of October. The document provides for, among other things, the withdrawal from the investor of the quota received in exchange for the construction of the plant, if he does not fulfill the condition of annual processing at the new facility of 70% of the resource extracted under the contract. According to the current legislation, a fine from 10 million to 900 million rubles is established for violation of the conditions.

But, writes German Zverev, legal acts that regulate a new type of liability for investors in onshore plants have not yet been developed. In particular, the form and procedure for sending information on the fulfillment of the standard have not been established, while now it is enough to send reports to the Federal Agency for Fishery on time. According to German Zverev, investors who have built 21 plants risk losing their rights to 118.2 thousand tons of pollock, herring, cod, etc. per year, or 1.77 million tons of the resource over 15 years worth about 100 billion rubles.

According to Mr. Zverev, risks can be removed either by excluding the provision that introduces a new basis for withdrawing the quota, or by correcting the wording. VARPE proposes to take into account in the processing standard not only the catch of the investor, but also companies from the same group with him, as well as to allow the processing of fish cut on the ship. As Mr. Zverev recalls, at the second stage of the investment quota program, it is planned to build another eight to ten high-capacity coastal plants.

Dobroflot CEO Alexander Efremov notes that the previously provided fine for non-compliance with processing requirements has already been a serious moment for investors. But the ability to meet the condition often does not depend on the company, he points out. So, continues Mr. Efremov, the role is played by the compliance of the fish caught under the investment quota with standards, fluctuations in prices for products and logistics, trade restrictions, etc. As Alexander Efremov emphasizes, the investors who built the plants have already invested in the facilities and it is not very clear why should now lose quotas in case of market complications. In addition, he points out, this was not provided for in the original investment agreements.

Although the deputy director of the management company “Norebo” Sergey Sennikov points out that the toughening of investors’ liability in some cases is justified, since the amount of the fine can be noticeably less than the proceeds from the sale of the resource extracted under the investment quota to third parties. On the other hand, the mechanism for calculating the recycling rate needs to be improved, Mr. Sennikov agrees. According to him, it would be worth considering the indicator of the raw materials used not from the total weight of the catch, but from the volume of fish that has undergone preliminary processing – decapitation and gutting.

Alexey Gordeev told Kommersant that written appeals from business representatives, as well as proposals and recommendations that were made at a meeting of the conciliation commission on the bill, will be worked out when preparing the document for the second reading. In addition, the regions must submit their feedback and proposals by November 27, after which amendments will be developed, he explained. The Federal Agency for Fishery also told Kommersant that the preparation of the bill for the second reading is still underway, and amendments to the second reading will be developed after all proposals are received.

Anatoly Kostyrev