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. Last Updated: 07/27/2016

Meat Firms to Putin: Quota System a Raw Deal

Meat quotas intended to benefit the domestic meat market will instead damage it, top industry executives told President Vladimir Putin on Monday.

In an open letter published in Vedomosti, representatives of 13 major meat-processing companies and the Meat Union said the mechanism for distributing import licenses is flawed and will jeopardize the meat processors' ability to stay in business.

The Economic Development and Trade Ministry, charged with implementing the quotas, has been making "monopoly" decisions, the letter said, claiming neither market participants nor the Agriculture Ministry were involved in designing the quotas.

The ministry's blueprint gives meat processors the right to import 50,000 metric tons of meat a year, or one third of the 150,000 tons allowed across the border annually. That volume is only enough to supply the country's plants for one month.

"This is hard to believe, but a group of leading meat-processing companies ... have been awarded quotas that will be exhausted in 30 days," the letter said. The rights for the remaining 100,000 tons will go to brokers, who will then charge meat plants a marked-up price, it added.

The country does not yet produce enough raw meat to meet local factories' demand, so processors must import meat from abroad. And the more expensive their raw meat inputs, the harder it is for meat processors to be competitive.

Russian processors can compete with meat produced abroad with the assistance of heavy state subsidies only if they get greater access to import quota rights, the letter said.

"We welcome the quotas, but they must be corrected as soon as it is possible. Unfortunately, from the beginning there have been very serious miscalculation mistakes in the design of the quota mechanism," said Meat Union president Musheg Mamikonyan, who signed the letter.

The ministry has said it will dole out this year's quotas among 889 firms in proportion to their share of imports from 2000 to 2002.

But meat companies have been importing most of their meat through middlemen, they said in the letter, complaining that it is these brokers -- and not the meat processors themselves -- that now have access to the lion's share of 2003 quota rights.

But there is still time to rethink this decision before the quotas go into effect April 1 for beef and pork, and May 1 for poultry, the executives said, appealing to Putin to intervene.

They would like to see import licenses distributed among the country's 50 or so key meat-processing firms.

If the quota mechanism were reconfigured, Mamikonyan said poultry investments would grow by 20 percent and in pork investments would grow by 15 percent.

The letter also proposed that country quotas on poultry exports be scrapped.

Producers said they hoped the agriculture community could meet Putin and air their concerns with him much as oligarchs often do. Consultations with the Economic Development and Trade Ministry, on the level of meat associations and unions are needed to hammer out improvements, they said.

Mamikonyan said he is confident that the flaws will be corrected, but he worried that by then it might be too late.