Farmers: there is no need for a state-owned recycling fee collecting company

       The initiative of the Head of State to transfer the functions of the recycling fee operator from private hands to the state and to revise rates was met by the Kazakh farmers in great hopes for changes. Farmers sighed with relief. At last they had been heard! While it is not known what rates will be fixed and who will take charge of the fees, the editors of World of NAN conducted a short survey on the subject of what rate would be affordable for domestic farmers, and whether it is possible to cancel the utilization fee?

100 million over 1.5 years for the recycling fee.

Pavel Luschak, a well-known Kazakh agribusinessman and the director of Naydorovskoye LLP, had already seen for himself the enormous cost of the recycling fee for machinery. He cannot call it any other way than a crushing blow to the farmers.

"Since June 27, 2020 we have paid more than 100 million in 1.5 years only for the recycling fee. We bought 16 tractors and two combines. Then, in 2020 it so happened, and it was too late to change anything, the contracts for the purchase of equipment were already signed in the spring. And the utilization rate was introduced not from the new year, so that farmers could prepare, to estimate their expenses, but almost retroactively, in the summer. This is a harsh blow to farmers. Imagine, we paid 11.5 million for a combine harvester. What kind of recycling fee is that? For a tractor 11-12 million is too much," the agrarian is indignant with the situation.

According to the farmer, the recycling fee, especially at today's level, will not help solve the problem of updating the fleet of agricultural equipment in Kazakhstan.

"We do not have more than 4% renewal of equipment, now it is realistically somewhere around 2%. This means that the equipment must work for at least 50 years. And the renewal indicator, which we strive for, is 6%. With the current rates we will not come to this indicator. The tariffs, in our opinion, if they cannot be removed, should be quite conditional. For example, if it is 100 euros for cars, like in the rest of the world, then for agricultural machinery it could be about 200 euros, i.e. no more than 100 thousand tenge.

Dealers are also against the recycling fee.

Management of the company-supplier of foreign agricultural machinery and service BHK Agro AG in its turn is in favour of cancelling the recycling fee for good.

"It is obvious that the farmers of Kazakhstan are against the recycling fee, as they incur additional costs when buying machinery. This has a negative impact on their solvency, and subsequently on their crops. After all, in some cases, the farmer is forced to make a choice in favor of cheaper, simpler and non-modern equipment. Every farmer in Kazakhstan would like to provide themselves with equipment that will bring them a high yield. This way they can effectively maintain the work of their farm and save jobs for their people. Therefore, there should be no utilization fee at all," the company representatives say.

As for the amount of agricultural equipment purchased by farmers after the introduction of the recycling fee, according to the management, over the past two years the number of purchased machinery has not dropped. But this was due to the fact that farmers of the country had a good harvest and prices for their products went up, which offset the additional cost of the recycling fee. But it is unknown exactly how sustainable such product prices are and how the situation will unfold in the future.

"There is no doubt that the recycling fee is working against Kazakhstan and its people. To date, bread is quite expensive, we believe that this is a fact of overpayment for every citizen of Kazakhstan. Now, when the transfer of the operator is being considered, it will be better for the farmers of Kazakhstan if the collection will be carried out by the state company, not private firms. We will hope that the recycling fee will be completely abolished. The work of experts should lead to the removal of this fee in the territory of the Republic of Kazakhstan!" - expressed their views in the company.

Farmers need " long-term loans".

Managing Director of the Department of Agriculture and Food Industry NCE "Atameken" Yerbol Yeseneyev believes that the recycling fee in current rates is ineffective, the rates should definitely be reconsidered. 

"There should be a feedback: funds from the recycling fee should be returned to entrepreneurs who buy domestic agricultural machinery. But even this will not solve the problem of mechanization of agriculture. To revive the market, it is necessary to expand lending mechanisms. Not just to reimburse the cost of buying certain agricultural equipment, but to issue " long-term" loans. That is, to open access to loans for agricultural machinery for 10 years at 4%. Then the farmers will not look for equipment, which is subsidized and listed by the Ministry of Agriculture", - says the expert.

According to Yeseneyev, the option of importing used machinery may also be considered, provided that these machines are suitable for further effective use.

Association of Farmers in favor of the cancellation of fees

The Farmers' Association of Kazakhstan, which so far has been strongly opposing the recycling fee, is still upholding its position. Deputy Chairman of the Association Akpar Maulenov cited several factors of negative impact of the recycling fee not only on the agricultural sector of the country, but also on the economy as a whole.

Firstly, there is a misconception that this type of tax will benefit the state revenues. About 90% of agricultural machinery sold in Kazakhstan is produced abroad. Whatever the rate may be, the companies-dealers will add it to the price of end products and thus stimulate the outflow of Kazakh currency abroad, A. Maulenov believes. Secondly, according to the expert, the rise in prices of equipment is equivalent to the rise in the cost of food. Today the depreciation of machinery, which is the main tool in the production of agricultural raw materials, is 10-15% of the cost. Therefore, if the utilization fee is retained the prices for food products in the market will keep growing; there can be no stabilization whatsoever. Thirdly, recycling fees have already led to an increase in the price of machinery, which has significantly reduced its availability to farmers. And despite the fact that recycling fees have started to be collected, no one has seen any equipment or old machinery being recycled. At the same time, it is common knowledge that the ROP was a private institution, and its proceeds went into the pockets of private individuals.

"Based on the above, the Association of Farmers of Kazakhstan believes that the recycling fee should be completely abolished. If this proposal is not supported, we can say that all officials who believe that the recycling fee is necessary, will work contrary to the instructions of the President," said A. Maulenov.

It is noteworthy that all of our interlocutors are now more concerned not about the new tariffs that are to be approved, but about whether the new initiatives will lead to an inevitable monopoly.

According to them, today farmers have a very limited list of agricultural equipment, which causes monopolization and overpricing. That is why all types of tractors of any assembly and country of origin should be presented in the market, so that the farmer could choose independently, without being limited to the presented list, the experts say.

"We believe that a state-owned operator company is not needed either. The operator could again become a monopolist, just like the ROP. Instead, recycling services should be moved to a competitive environment. At the same time due to competition the appropriate size of the recycling fee will be formed at such a level that it will be more profitable for farmers to dispose of equipment instead of scraping it for metal," summarized Akpar Maulenov, who defends the interests of Kazakh farmers.