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Thursday, October 27, 2016

The production of tractors and combines has accelerated sharply

Another sector of the Russian economy has blossomed during the crisis – agricultural engineering. Contribute to its success including a record crop of grain. But just a few years ago the industry was a real decline and crisis. Now, however, domestic tractors and combines an accelerated pace in winning back the market from foreign competitors.

Russia’s accession to the WTO in 2012, carried both advantages and disadvantages. And at the risk of domestic agricultural mechanical engineering. Due to the reduction of duties on imported machinery from 15% to 5% in the WTO three years ago predicted that by 2020 the share of domestic agricultural machinery will fall before a paltry 8% against 92% in the import of combine harvesters and tractors.

“Farmers really have to update the Park and were able to gather a good harvest thanks to this”

However, for the past two years all is a different scenario. When Russia joined the WTO, the share of domestic agricultural equipment on the Russian market was a little more than 20%, but this year the Russian factories promise to win from branded manufacturers more than half of the market (51-52%).

In 2015, the Russian manufacturers of agricultural machinery has increased the production volumes by almost 27%. The first half of 2016 became even more successful. The growth of production of grain harvesters has already exceeded 35% for the six months and year will be 50%, declared recently the Deputy Minister of industry and trade Alexander Morozov. The production of tractors this year have already risen by more than 50%. Mechanical and pneumatic seed drills for the six months increased 2.3 times. The situation is similar in the production of other agricultural equipment – sprayers, cultivators, balers, grain cleaning machines, mowers etc.

The main reasons for this success lie in the devaluation of the ruble and the new mechanism of state support – the government decision No. 1432 of 2012.

“Foreign cars from 2014 went up two times, whereas Russian producers have raised prices in the past year, less than 14%, this year by 6%. We practically kept the prices indexyou them below the inflation,” – says the newspaper VIEW Director of the Russian Association of agricultural machinery producers Rosagromash Yevgeny korchevoi.

As for the resolution, then it is the government provides farmers the opportunity to buy from producers, harvesters, tractors, sowing machines and equipment for fodder discount. At first the discount was 15%, then it increased to 25-30% depending on the region of implementation. This discount, then the state returns to the Russian producers.

The program was such a success that the originally planned budget funds were not enough. If 2014 was spent in this programme, 1.6 billion rubles, in 2015 the government has increased funding to 5.2 billion rubles. “This was a good incentive for the purchase of Russian-made cars,” says korchevoi. In 2016 financial support thanks to Dmitry Medvedev was extended even higher, up to 10 billion rubles.

“Dependence on budget financing to increase production is very large. Money this year is already over, 7 billion roubles have already been transferred to the accounts of plants, and the volume of applications received in the Ministry of agriculture, for grants already exceeds the balance in 3 billion roubles. Therefore, many plants are now loaded equipment discount on this program at your own risk, hoping to get a refund next year. The program stipulates such a scheme: if this year is not enough money, you can get them in the next,” says korchevoi.

The catch is that next year in the budget for this state program provides only 1.9 billion rubles in the draft budget for 2017 is not provided increased funding. “These 1.9 billion rubles, most likely, not even enough to pay off the “debt” plants for this year”, – said korchevoi. Therefore, we can say that next year the funding is already there.

The source worries that if funding for the state program will not be increased in 2017, it will lead to stagnation in the market and stop production. According to the Association estimates, this program for next year have about 15 billion instead pledged 1.9 billion “If the program stops, this will lead to a sharp drop in demand. This year we have twice increased, and next year twice will fall,” says korchevoi.

If funding for the state program, which is scheduled till 2020 will be increased, then growth will continue and by the end of this, and by the end of next year, the expert believes. In General, and budget, and the economy will be more profitable to find the necessary billions for the manufacturers of combine harvesters and tractors.

The budgetary effect on the program 1432 is one to two, the Director of the Association “Rosagromash”. This means that one ruble invested by the state in agricultural engineering, back to the budget comes 2 rubles.

Due to increased production in the past year, local factories opened a thousand new jobs this year, got a job 2 thousand people, and all this against the backdrop of layoffs in other industries. In addition, because machines consist of 90% domestically produced components, it implies a multiplier effect on related industries. “One job created in the agricultural machinery, support about 9 jobs in other sectors along the chain – equipment manufacturers, motors, metal, etc.,” says korchevoi.

Finally, agricultural engineering only for six months paid to the budget by 60% more in taxes than last year.

“For the first time in 15 years, the rate of renewal of agricultural machinery exceeded the rate of disposal. Farmers really have to update the Park and were able thus to gather a good harvest”, – said the source.

From the development of agricultural machinery depend directly on the success of Russia’s grain harvest that the last three years only grows. Due to this, Russia has become a world leader in grain exports, ahead of Canada, USA and Europe. It is the agricultural sector in the crisis was one of the main drivers of growth.

“Tractors need to be able to sow, if not sown, then clean up nothing will. And harvesters are needed in order to clean it. Time of sowing and harvesting is limited. If on probation for two weeks to harvest, it will decompose if wet, or fall, when the weather is dry,” says korchevoi.

Finally, the program caused a new investment boom in agricultural engineering: the increasing demand provided the income and stable financial state, hence the availability of funds for development or the opportunity to take the loans. “Plants to dramatically increase investment. There is now almost no new plant would not build new shops, new parts or installing new equipment,” – said the expert.

How serious the situation has changed in agricultural engineering, demonstrated by the fact of transfer of production of tractors Versatile-2375 from Canada to Rostov-on-don. Just recently, this company started full-fledged production with a Russian residence permit.

Three years ago this canadian plant has come to the attention of President Vladimir Putin. Then he asked the President of the company “New Commonwealth”, head of the plant, Konstantin Babkin to move the factory from Canada to Russia. That Babkin did not hesitate to give the whole truth: such transfers are economically feasible and will lead to direct losses, either to higher prices for tractors. But now, after a few years the situation has changed: due to the devaluation of the ruble and the support of the Russian Federation to collect tractors became economically feasible in Canada.


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