The Ministry of Agriculture will combine compensating and incentive subsidies for farmers

Starting from 2024, the Ministry of Agriculture will combine two mechanisms of state support for farmers – compensating and incentive subsidies. Industry priorities remain largely the same—the changes made to the state agricultural program significantly change the logic of financing the agro-industrial complex. The decision to abandon extensive production growth in favor of maintaining the current structure of the sector is formally explained by the achievement of the main goals of ensuring food security, but in essence the state of affairs makes it possible to redirect these funds to compensate the sector for expenses that arose and increased due to the consequences of the Russian military operation in Ukraine.

By Resolution No. 2065 of December 2, 2023, the White House combined compensatory and incentive agricultural subsidies, abandoning the latter. Changes have already been made to the state program for the development of the agro-industrial complex and will come into force on January 1, 2024.

As part of the “single” subsidy, the Ministry of Agriculture has identified 12 priorities. Five of them – support for agrotechnological work, elite seed production, livestock breeding, small forms of farming and insurance – are established for all regions “by default”. Of the remaining seven (among them, for example, support for milk production, as well as the so-called traditional industries), regions will choose three for subsidies – information for receiving funds for them will be submitted to the Ministry of Agriculture annually before July 15. The general list of priorities of the new edition of the state program largely repeats the goals of both – compensating and stimulating – subsidies (in 2023 they accounted for about 60 billion rubles). As Kommersant was told by the Ministry of Agriculture, these are “traditional measures to increase the food independence of the Russian Federation.”

Initially, it was proposed in 2019 to divide state support for the development of the agro-industrial complex into two parts – stimulating (aimed at developing priority industries) and compensating (to compensate for lost income of producers). Then it was assumed that such a breakdown of funds would contribute to the agricultural specialization of the regions (see Kommersant, July 22, 2019), and compensatory subsidies would be gradually phased out. However, in 2020, the goals were adjusted to suit economic needs – to support the industry during the pandemic, the ratio of compensating and incentive subsidies was fixed at 58/42%. In the logic of refusing compensation (de facto state redistribution of profits in favor of less profitable sectors), the future of state support for the agricultural sector was discussed, including at the beginning of 2023 (see Kommersant on January 25). The rhetoric changed in the summer, when it became clear that the sector no longer needed stimulation, and resources should be directed to its support and progressive development (see Kommersant on July 4). The formal explanation was the achievement of the agro-industrial complex of the Russian Federation of many of the goals established by the Doctrine of Food Security. This is exactly what Deputy Head of the Ministry of Agriculture Elena Fastova spoke about when announcing the refusal to stimulate the sector.

Now, “the purpose of combining subsidies is to consolidate financial sources, simplifying the administration of state support in the constituent entities,” the Ministry of Agriculture explained to Kommersant. The adjustment did not affect the resources of the program, but the refusal to stimulate the growth of the sector will apparently not cause a decrease in the efficiency of spending budget funds: in fact, the money intended for this can be spent on covering additional costs for producers due to sanctions. The costs of farmers are growing rapidly after the start of the Russian military operation in Ukraine, for example, due to the severance of relations between foreign suppliers of agricultural machinery and spare parts with Russian business (see Kommersant on February 7), as well as the ongoing restructuring of logistics.

Kristina Borovikova