SABOTEURS OF AGRICULTURE

In the inaugural 2024 edition of the quarterly bulletin State Audit, the Azerbaijan Chamber of Accounts has raised alarms over critical issues plaguing the nation's agricultural sector. The research, spanning 2019-2022, reveals persistent challenges, evidenced by the sector's sluggish growth—a mere 1.1% increase contributing ₼1.44 billion to the GDP in the first quarter of 2024.

Incomplete Legislation

The cornerstone of Azerbaijan's food security is the agro-industrial complex's efficacy. The grain industry, reliant on modern technologies and new high-yielding grain crop varieties, plays a vital economic and social role. Yet, the challenge of import substitution in plant cultivation looms large, with seed production efficiency emerging as the solution.

Regrettably, Azerbaijan's legislation in this domain not only falls short of international best practices but also stifles industry growth. The Court of Accounts criticizes current legal acts for their failure to reflect 21st-century realities, thereby constraining seed production's potential, particularly of higher classes (Original, Super Elite, and Elite) at the foundational stage.

The system's inadequacies fail to incentivize the production of locally adapted seeds, rendering Azerbaijan import-dependent. Furthermore, the chamber highlights the unregulated documentation system and control procedures across seed circulation stages, opening doors to potential abuses.

For instance, the subsidy system for seed production is mired in disarray. The Accounts Chamber decries the practice of granting subsidies for local reproductive seeds (R1) production without prior elite seed acquisition, undermining the system's integrity. The study reveals that a significant portion of subsidy recipients failed to declare their planted areas in 2021 and 2022, signalling fund misuse.

Despite employing "modern digital remote control elements," the absence of electronic invoices and customs declarations casts doubt on the authenticity of reproductive seed movements, potentially leading to unwarranted payments.

The bulletin also voices concerns over Azerbaijani agriculture's reliance on foreign seed varieties, with a staggering 88.1-93% of new varieties registered in the State Register of Protected Breeding Achievements between 2019 and 2022 being of foreign origin. This dependency, stemming from inadequate local breeding efforts, exposes the country to global seed market fluctuations.

During this period, 37 new local varieties were registered, yet they failed to pique farmers' interest, indicating a disconnect between variety development and consumer farm requirements, alongside a lack of promotional efforts for new varieties. The Accounts Chamber asserts that some new varieties meeting the requirements were not produced to the expected standards.

Negligence in Reporting or...

In 2020-2022, the Agro-Services Agency of Azerbaijan dispatched 327 vegetable crop varieties and 31 melon varieties to the Vegetable Research Institute (VRI) for state trials, sans coordination.

Alarmingly, the institute, unauthorized for such tests, expedited the testing of 296 varieties, casting doubts on the results' legitimacy and reliability. This suggests that state seed trials have devolved into a mere formality, necessitating an in-depth investigation to ascertain the authenticity of the test outcomes.

The Audit Chamber also uncovered the unjustified payment of ₼676.7 thousand in insurance compensation to the Agrarian Credit and Development Agency, executed without legal justification. This misappropriation of funds, partially state-budget financed, underscores a broader issue of non-compliance with insurance activity reporting legislation by both the Agrarian Insurance Fund and the Agency of Agrarian Crediting and Development, compromising the agrarian insurer's financial stability and solvency.

Additionally, the Accounts Chamber identified discrepancies in the agro-insurance tariff determination system, which disregards the country's agro-climatic zoning, leading to inequitable insurance premium calculations across different economic entities.

Despite varying maintenance conditions and general insurance risks for cattle and small livestock, a uniform annual insurance coverage tariff (9.5%) with a 10% unconditional exemption was applied, conflicting with the TARSIM agro-insurance model in Türkiye, which served as a reference point.

However, agricultural insurance penetration levels are on the rise, as evidenced by the Agrarian Insurance Fund of Azerbaijan providing ₼542 million in agro-industrial complex risk coverage under existing contracts by the end of 2023, with insurance premiums reaching ₼16.9 million for the year.

In 2023, crop production insurance premiums totalled ₼13 million, marking a 48% increase from 2022, with insured agricultural land spanning 380,476 thousand hectares, a 43% increase from the previous year, and insurance coverage estimated at ₼506 million.

Livestock insurance premiums for 2023 amounted to ₼3.9 million, covering an estimated ₼36 million in risks, with 7,843 heads of cattle insured.

Furthermore, the Agro Insurance Fund compensated farmers and farms with ₼4 million 406 thousand for insurance claims in 2023, a substantial 1.8-fold increase from 2022.

Ultimately, the "State Audit" bulletin transcends mere critique, serving as a clarion call for action. To foster sustainable agricultural sector growth, sweeping reforms are imperative to refine breeding work, overhaul the insurance system, and enhance budgetary fund utilization transparency.

Modernisation of legislation and introduction of best practices in seed production is the key to increasing the competitiveness of Azerbaijan's agricultural sector, ensuring the country's food security and its integration into the global economy.