23 October 2019

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Liberalisation and increased transparency in agriculture increase its share in Azerbaijan's GDP

Author:

01.09.2019

Record growth indicators of the agricultural sector in Azerbaijan in the first half of 2019 were expected. A lot of work has been done in this direction both to improve management systems of individual components of the segment and to create additional levers that would stimulate private farms.

One of the important points was the approval of the Law on Agricultural Insurance by the President Ilham Aliyev, followed by the establishment of the Agricultural Insurance Fund with an initial authorised capital of ₼1 million, as well as the launch of a single window system covering the entire range of agricultural services.

 

Crop production

“Over the last six months, agriculture sector has increased by 13%, mainly due to crop production, where growth was 25%. It means that the investments, reforms, subsidies, and a scientific approach to agriculture yield results,” President Aliyev said at a recent meeting on the socio-economic issues.

For example, grain production increased by 40%, although the average yield of sown areas exceeds 3 metric tonnes per hectare. But there are farms which yield 6 metric tonnes and above. Production of other types of products also increased: melons and gourds by about 40%, fruits by more than 20%, cocoons by 25%, vegetables by 14%.

According to the Minister of Agriculture Inam Kerimov, the main factor that made it possible to achieve a record this year was the provision of proper technical equipment. “So, every year from we received from our farmers numerous letters to improve their technical equipment. However, as a result of the construction of the deployment system, in particular, the use of modern equipment, installation of GPS units on combines and their proper deployment, this year the harvest was completed 20 days earlier,” minister said.

The government also solves another urgent problem of farmers associated with the new equipment. According to Mr. Kerimov, reforms have ensured complete liberalisation of the leasing market as well. All suppliers now take advantage of state benefits and subsidies, and the cost of equipment on the market has dropped by almost 30%. Thus, more than 700 units of equipment was already sold this year. Given the experience of previous years, the level of supply of agricultural equipment to farmers can be considered satisfactory.

In addition, the government is working to ensure the availability of fertilizers, as farmers sometimes have to travel long distances to get them. Therefore, in 2019, the Ministry of Agriculture ensured the sales of fertilizers directly on the fields and their direct delivery to farmers. On the other hand, there will be a significant decrease in fertilizer prices.

By the way, one of the main points of reforms is to accelerate digitalisation in the agricultural sector. According to Minister Kerimov, currently more than 300 thousand farmers have already registered in the Electronic Agricultural Information System (EAIS). In January 2020, subsidies will be provided completely in digitalised form. “The e-farming system will simultaneously allow us to plan and predict the yield of our farmers in advance. Therefore, they must declare their sowing plans in electronic format,” minister said.

 

Agricultural Service of ASAN

Perhaps the agrarians are most active in the field of liberalisation of state subsidies to farmers. This is the sphere in which bureaucracy, procrastination, and elements of corruption were most often noted. Therefore, eliminating the negative aspects here, you can greatly accelerate the development of the agricultural sector as a whole.

So, before, farmers had to apply to the commission for subsidies, which included representatives of the rural executive, the municipality and two rural elders. This commission assessed the farmer sown area and determined the amount of the subsidy. Then the necessary documents were prepared for the farmer, which were sent to the State Center for Agrarian Development (SCAD), and from there to the Central Commission under the Ministry of Agriculture. That is, the documents passed through three commissions.

According to Nijat Nasirli, an expert on agricultural issues, errors were made in any of the authorities, where the members of commission could write in their reports, for example, 45 hectares instead of 35 hectares.

The situation began to change a year ago, when the President of Azerbaijan issued a decree on the establishment of state centres for agrarian development (SCAD) on the basis of city and district administrations of the Ministry of Agriculture. They will host farmers and carry out work in all directions. According to N. Nasirli, before the farmer had to visit 4-5 instances located in different parts of the region. “Now, all these bodies are united under SCADs. A farmer solves his problems in one building in a short time. About 40 services are provided in each centre, including the issuance of subsidies,” said the expert.

It was also decided to combine four different bodies (State Phytosanitary Service, State Veterinary Service, State Agency for Registration of Plant Varieties and Seed Control and the Main State Technical Control Service) into one Agrarian Services Agency. A citizen will be able to receive all types of services in this department. In fact, it will become a kind of ASAN Service for farmers.

Moreover, under the new subsidy system, farmers will be able to apply online without any bureaucratic delays. According to the chairman of the Agency for Agricultural Lending and Development Mirza Aliyev, while 70% of the amount will be paid to suppliers through farm cards, which will be distributed to farmers by the end of 2019. These are special bank cards for subsidies. “Current cards only allow you to cash out, new cards provide for both cash and non-cash payments. It will be possible to cash 25%, the remaining 75% are provided for payment of non-cash agrotechnical services. This will contribute to the development of non-cash payment systems in the country,” said the chairman of the agency.

 

New rules

By the way, this summer the presidential decree defined a new procedure for subsidising agricultural producers. Now the farmers can apply for three types of subsidies: sowing, production of agricultural products and purchase of seeds. A subsidy for sowing is provided for each hectare of sown area to compensate partially the funds needed for growing crops. The crop subsidy is an additional subsidy for sowing, for each tonne of crops sent to suppliers.

“Subsidies will be provided under the new system starting from January 2020. This will allow us to increase productivity, employment, improve food security, as well as our export potential in agriculture,” said Minister Kerimov.

According to Mirza Aliyev, Chairman of the Agency for Agricultural Lending and Development, subsidies to agricultural cooperatives for sowing on an area of ​​more than 50 hectares or sowing perennial crops will be increased by 10%. “The logic is to unite the farmers. Lower production costs and increased financial opportunities as a result of joint activities will have a positive impact on productivity,” Aliyev said.

By the way, fixed rates of subsidies are established for producers of livestock products. According to the decree, the subsidy for each healthy calf is set at ₼100. For beekeepers, the subsidy is set at ₼10 for each bee colony. Subsidies are issued annually until 2023. The subsidy for producers of silkworm cocoons is ₼5 per kilogram of cocoons. Perhaps these rules will increase the growth rate in the livestock sector, which today reaches 3%.

At the same time, the new rules exclude farmers' contacts with officials, loss of time and other interfering factors as much as possible - the whole process is carried out in electronic form. From January 1, 2020, subsidies will be provided through EAIS. Farmers not registered in the system will not be able to receive subsidies. The provision of subsidies under the new rules will facilitate farmers' access to them and prevent the loss of time.

The ultimate goal of consistent implementation of reforms is to increase the level of local food production. They will also help increase the overall share of agricultural sector in Azerbaijan's GDP, which today reaches 5.6%, which will allow agriculture to finally take its rightful place among the components of the country's economic growth.



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