Exchange sales threshold estimated to create 275 mln rubles of additional expenditure for Russian fishing industry - industry associations
MOSCOW. July 23 (Interfax) - The new rule requiring a proportion of fish produce to be sold on the exchange will lead to additional expenditure of 275 million rubles for the fishing industry, the All-Russia Fisheries Association (VARPE) and the Fishery Shipowners Association (FSA) said in a letter to Deputy Prime Minister Dmitry Patrushev, a source with knowledge of the document told Interfax.
Contacted by Interfax, the two associations confirmed that they had sent this letter.
The letter refers to a draft bill which will amend the law on organized trading, allowing the government to set a list of selected product types and thresholds of how much is to be sold at organized trading sessions. These thresholds cannot exceed 25% of production, unless legislation stipulates otherwise.
The authors of the letter appealed to the deputy prime minister to conclude the draft bill with a government instruction to the federal executive authorities concerned to conduct an assessment of the feasibility of the bill's adoption and its consequences for agricultural and fishing companies.
"The draft bill which has been developed will lead to additional annual expenditure of 275 million rubles for businesses in the industry and will make it more difficult for them to fulfil long-term investment obligations, as well as hindering the achievement of 'Fish and Seafood' targets under the Agricultural Products Export federal project," the source quoted from the letter. "Mandatory trading of fish products on the exchange entails disclosing information on deals and their participants during export, which will become a tool for initiators of anti-Russian sanctions to cause more damage to Russia's economic interests on the global market."
The associations wrote in an appendix to the letter that "stable, organized business and trade" would lose approximately 667,000 tonnes of frozen fish valued at 85 billion rubles and 57,000 tonnes of shellfish at 40 billion rubles if 25% of frozen fish and shellfish were to be sold on the exchange as per the new requirements. This will lead to increased expenditure for businesses, disruptions to the stability of supply and greater prices for end buyers "due to the breakdown of the system of long-term contracts between fishing companies, fish processing companies and distributers, which set specific volumes, deadlines and prices for the products supplied". "These contracts allow all parties to set up production and investment programs, guarantee sales to fishing companies and raw materials to processing companies, as well as the stable supply of consumer produce to the retail market, public catering outlets and consumers," they said.
The authors of the letter also said that trading fish on the exchange was ineffective, as fish produce does not meet exchange commodity specifications, such as standardized consumer properties and interchangeability. "Due to the specific features and manifold properties of fish products, there is no demand for trading on the exchange among fishing companies, fish processing companies or retail chains," the letter reads. The authors also said that global practice confirmed that fish produced by fishermen was in a separate category to exchange commodities, and Iceland has proven the effectiveness of selling fish under long-term contracts.
"As opposed to the long-term contracts that have been tried and tested in the fishing industry, the price fluctuations which characterize trading on the exchange do not allow for the effective planning and revenue distribution necessary to keep business sustainable. The biggest victims are small and medium-sized enterprises, which have a smaller 'safety cushion' for when prices fall," the letter reads.
As reported, the Russian Agriculture Ministry has also expressed concerns on the introduction of a threshold for sales on the exchange. In a letter on the draft bill, the ministry said that trading agricultural produce on the exchange was an effective tool allowing producers to tap into new sales opportunities and areas. However, it also said that "an attempt to introduce tough restrictions on the volume of products to be sold in organized trading sessions could lead to a series of negative consequences". "Firstly, fears of not meeting the requirements will force farmers to increase production volumes in contracts and thus risk failing to fulfil obligations if harvests are poor. Secondly, this could lead producers who prefer more flexible, lower-risk sales outlets to lose interest in organized trading sessions. Thirdly, tough requirements could limit competition and restrict access to the market for small farms who are unable to guarantee stable supply volumes," the ministry said.
The ministry also said that the new requirements should take into account the specifics of agricultural production, including weather dependency and other factors outside of producers' control.
