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07 december 2021
5 min
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Utilization fee, VAT, subsidies. What prevents farmers from renewing their transport fleet?

Utilization fee, VAT, subsidies. What prevents farmers from renewing their transport fleet?

Kazakh officials from high tribunes proclaim: it is impossible to increase productivity in agriculture without implementation of new technologies. The most sensible idea! However, it does not lead to the right actions, and the result on renewal of agricultural park is hardly impressive yet. What are the possible alternatives? The reporter of World of NAN tried to answer this and other questions.

THE STATISTICS ARE DISMAL

According to official data from the Ministry of Agriculture, at the beginning of this year 2021, the country has 141.7 thousand tractors, 36.9 thousand combines and more than 250 thousand other machines. At the same time, the average depreciation of the fleet of self-propelled machines is 76%.

Agrarians are working with old agricultural machinery and what of it? Many reasons! New tractors and combines reduce fuel consumption, increase productivity, and reduce idle time for technical reasons. Having old machines, the farmer only loses money on its endless repairs. And if the machinery broke down during the sowing or harvesting season, it's a total disaster. And such is the suffering of the majority of agrarian sector of Kazakhstan.

THE MINISTRY OF AGRICULTURE IS TRYING BUT IT IS NOT ENOUGH

The Ministry of Agriculture is trying to modernize the technical equipment of the domestic farmers. There is a National project for 2021-2025 which provides for investment subsidies to offset part of the cost of buying agricultural machinery (25% - for imported, 30% - for domestic). The budget for these years includes 489.2 billion tenge. It should be noted that about 45% of the total amount of subsidies is spent on agricultural machinery. Thus, in 2020, 54.8 billion tenge was paid for the purchase of 15572 units of agricultural machinery. There is also a leasing programme with funds worth 307.3 billion tenge. For more details about leasing read here: https://world-nan.kz/blogs/subsidii-na-selkhoztekhniku

In response to World of NAN inquiry the Ministry of Agriculture also noted that the norm of subsidies may be independently increased by regional akimats up to 35% at the expense of the local budget. And this is not all, the local authorities can raise the payments up to 50% for priority types of equipment, provided in the programs of regional development: sugar beet harvesting and fodder harvesting equipment, self-propelled sprayers. Isn't it great? The work is being done, there are programs and considerable money is invested. Although there was an issue of embezzlement of these funds this year, but it is another story.

The efforts of the relevant department are paying off. If in 2016 the rate of renewal was 2%, in 2020 it will be 4.1%. But that is not enough! Do you know what the world standard for agricultural equipment renewal is? 10% per year. Given the growth of 2% over 4 years, we will reach this result in 12 years. I do hope that such an analysis will turn out to be wrong, and we will come to this result sooner.

HOW WE ARE STONEWALLING OURSELVES

When a farmer is asked, what prevents you from buying a new tractor? The most frequently heard answer is the recycling fee. There was so much negativity around this topic. Futile attempts to collect signatures on petitions, various public speeches and protests did not yield results. And why? Because someone influential is insanely greedy, while the ordinary peasants are left to suffer.

Because of recycling fee the prices for machinery rose by 10-12%, and only for imported equipment. But then we have subsidies, from which the deduction of the duty is 13-15%. And if you bought the equipment on credit, the balance from the subsidies does not cover the interest rates, which sometimes exceed 30% of the total cost (for the duration of the loan). This explains the low renewal rate of 4%. We are slowing ourselves down. And the worst thing is that up there, on top, they understand this and do nothing.  

Of course, not only the recycling fee is to blame for the low rate of farm equipment renewal. There are other reasons: low income of farmers, instability of currency, general growth of prices for machinery. In addition, next year imported equipment may go up by 12% due to the removal of restrictions on VAT. Earlier we reported on the extension of the VAT credit method for imported goods, but so far the bill has not been approved. In general, there are many reasons, but the decisions of the Ministry of Agriculture are limited, so the results will be accordingly.

WE DO NOT NEED THE EXPERIENCE OF OTHERS

It is impossible to quickly update the fleet of farmers for the reasons listed above. However, we need to sow and reap now. How can we help farmers today? Belarus has found a simple solution: it subsidizes the purchase of spare parts and repair services for agricultural machinery. In an official request from World of NAN we asked the Ministry of Agriculture if such an innovation is possible in our country. The Ministry replied no, although the wear and tear of self-propelled equipment is 76%. Then who can domestic farmers expect support from?

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