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. Last Updated: 07/27/2016

$7.7Bln Farm Debt Plan in the Works

The Finance Ministry told lawmakers Monday that a proposal to restructure 220 billion rubles ($7.7 billion) in farm debt would be drawn up by April in a bid to bring some relief to the cash-strapped agricultural sector.

But Deputy Finance Minister Andrei Petrov told the State Duma hearing that the government was only willing to revamp the debt of agricultural producers if the farms carry out reforms.

"I know that some think we should forgive the debt, but all previous debt write-offs didn't do any good," said Petrov. "There is no reason to write off debts without structural reforms."

Petrov said the accounts of about 37,000 agriculture enterprises, or 90 percent of Russia's farms, have been frozen due to debt arrears. More than half the debt — 52 percent — is in taxes, payments to nonbudgetary funds and fines.

The debt skyrocketed 25 percent from 175 billion rubles in 1999 to 220 billion rubles last year, according to the Audit Chamber, the Duma's budgetary watchdog. At the same time, state subsidies dropped from 3.6 percent of budget spending to 1.21 percent last year, leading the number of cattle in Russia to halve over the past decade as food imports shot up 40 percent.

Petrov said the finance and economics ministries are piecing together a plan that envisions the revamp of tax and energy debts to farms that can make current payments. The plan also calls for farms to dramatically change their management, distribution and sales.

The deputy finance minister said qualifying farms would get subsidies proportional to their output.

The program will be submitted to the Cabinet at the beginning of April for implementation this summer, he said.

The proposal drew harsh criticism from Communists and Agrarians in the Duma who said the government was asking for too much too soon. Dozens of farm directors who were invited to attend the hearings agreed.

Vladimir Plotnikov, head of the Agrarian lobbying group, said the government should forgive fines, roll over tax debts for 10 years and not push for immediate reforms. But other lawmakers said that reforms are a must if farms want to continue getting state handouts.

"We must create civilized market tools to manage the agriculture complex in Russia as a whole and in every single farm," said Alexander Chetverikov, a deputy with the Russia's Regions faction. "As for subsidies, I am positive that the cash must be earned."

Chetverikov, who founded Agroholding in Kursk, said his group used reforms "to raise 53 agriculture enterprises in 12 regions of Russia from ruins."

"Look, 60 percent of [farm directors] sitting here and complaining about their hard lives drive Mercedes and buy apartments in the cities while their farms rot," said Gennady Kulik, a Duma deputy and former deputy prime minister in charge of agriculture. "We must talk about this too if we want to be completely honest."