Pros and Cons of Utilization Fee for Agricultural Machines

Last year, disputes raged between Kazakhstani farmers and machine builders. The reason for the heated discussions was the initiative to introduce a recycling fee for agricultural machinery. Incidentally, this has been talked about in the country over the past few years, but so far everything has been limited to polemics between farmers and representatives of the machine building industry of Kazakhstan. And, it seems that each of the parties has reasoned arguments. Thus, farmers state that with the introduction of a recycling fee in the country, the cost of equipment will increase, and this will lead, accordingly, to an increase in the prices of their products. Machine-builders, however, argue that it is necessary to support the state, Kazakhstani enterprises producing tractors and combines. In support of this, they conducted the experience of the countries of the Commonwealth. Thus, in neighboring Russia, about half of all agricultural machinery is Russian-made, in Uzbekistan this it is 80%, and in Belarus in general 90%. Farmers without stimulation from the state in buying domestic combines and tractors, Kazakhstan cannot achieve such indicators.

Photo by agrovesti.net

However, full-fledged production of agricultural machinery in the country is not yet possible. Localization in Kazakhstan is less than 35% and the introduction of the utilization fee will not affect Kazakhstan's agricultural machinery in any way. Another argument in favor of the position of machine builders. Today, for the most part, agricultural machinery operating on the fields of the republic has exhausted permissible resources. Experts say that the wear of tractors and combines is 80%. These machines constantly break down, which entails high costs for their repair. Which does not have the best effect on labor productivity in the domestic agricultural sector. Ideally, the agricultural machinery fleet should be updated annually at 6%, but in reality this figure is 1-1.5% per year. It would seem that in this situation, the interests of farmers intersect with the interests of domestic machine builders. However, in reality it turns out that they are directly opposite.

NCE Atameken proposal

Nevertheless, in March 2018, the Atameken National Chamber of Entrepreneurs supported the introduction of a recycling fee for agricultural machinery after July 1, 2019. True, for this it was necessary to fulfill certain conditions:

• delay the introduction of the fee for 1 year;

• not introduce a fee for equipment that is not produced in Kazakhstan or is not produced in sufficient quantity;

• do not introduce a fee for previously registered agricultural machinery;

• introduce a subsidy of 25% of the cost of equipment (this measure was introduced in July 2018 by order of the Ministry of Agriculture of the Republic of Kazakhstan);

• develop a preferential program for the purchase of equipment at a low percentage (introduced in July 2018);

• introduce a program of a discount certificate upon delivery of old agricultural machinery for utilization (corresponding changes have been made to legislation, will automatically work when the utilization fee is introduced);

• introduce localization obligations (agreements on the industrial assembly of agricultural machinery were introduced in March 2019).

In the National Chamber Atameken, they went even further, where they proposed a whole program to stimulate Kazakh farmers to buy domestic agricultural equipment. For this, the farmer will need to hand over the old combine or tractor for scrap and obtain a certificate for the purchase of new agricultural equipment. True, the certificate will only apply to local manufacturers. They even stated the amount that the farmers will receive for the equipment handed over for scrap - 1.5-3 million tenge, and this amount can be doubled when using two certificates. In addition, if today in order to dispose an equipment you had to pay 300 thousand tenge at your own expense, then after the program is put into effect all transport costs are paid by the EPR.

Utilization fee will be mandatory for domestic agricultural machinery

In February 2019, the deputy of the Mazhilis of the Parliament, Kenes Absatirov, in his request to the Government, also made a proposal to stimulate domestic farmers to acquire Kazakh agricultural machinery. And for this, it is necessary to introduce waste collection for foreign agricultural machines. The amount of the fee should be 5%. The answer was as follows: the Cabinet is developing a Comprehensive Program for the Development of Domestic Machine building for 2019-2030, where all measures of state support will be spelled out, including agricultural machine manufacturers. And very soon, the Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan, which oversees domestic machine building, announced that the utilization fee will be compulsory for foreign agricultural machines. But more surprising was the size of the fee that they proposed: from 10 to 30%. Agrarians were certainly not ready for such a development of events and opposed such an initiative. According to them, after its implementation, new agricultural machinery will soar in price by these 10 - 30%. Of course, the choice is left to every farmer: to buy more expensive, but high-quality foreign equipment or cheaper domestic assembly. And again, the question is left unanswered. At the end of last year, the Ministry of Agriculture nevertheless announced that the utilization fee would be introduced only for domestic combines and tractors. This decision was made during the work of the interagency commission