After Russia has imposed an embargo on Lithuanian agricultural production, the government is considering not only subsidies for food products but also a reduced 5-percent value-added tax (VAT) rate for vegetable and meat producers.
© Reuters/Scanpix

On Monday, Minister of Agriculture Virginija Baltraitienė met with representatives of meat, dairy and vegetable producers too discuss restrictions introduced by Russia on agriculture and food product imports from the European Union as well as possible measures to regulate the market.

According to the minister, in the dairy sector, the embargo has affected four companies that used to export to Russia and have gathered 1,400 tons of surplus milk per day. The companies ask to subsidize these losses, which later will be recovered by Lithuania from the European Commission. It is estimated that subsidies may require approximately LTL 20 million (EUR 5.8 million) per month. This is the sum the dairy companies lose due to export restrictions to Russia.

Representatives of meat sector also ask to subsidize a share of their losses.

"And, of course, all of them raised the question of VAT reduction, both vegetable and meat producers want a reduced rate of VAT to become competitive with meat producers of other countries, more precisely, so that the market-place would not become a rival as it is happening at present," said Baltraitienė.

The minister could not provide exact figures of how much VAT rates could be cut; according to her, it should be calculated; however, meat and vegetable producers were interested in reducing the rate to 5 percent.

"Yet this decision should be made at the political level. Whether such decision is made or not - I do not know, but we will inform about the request of our processors and producers," underlined Baltraitienė.

It is estimated that the Lithuanian dairy sector will sustain a loss of LTL 20 million (EUR 5.8 million) due to the Russian embargo. Meat producers are still calculating losses.

Gintaras Bertašius, director of the dairy plant Vilkyškių Pieninė, said that it was possible to process the entire milk; however, the question concerning its buying-in price arises. According to him, that is why the assistance of the state is necessary at present.

"Today, it is necessary to buy in dairy products, to organize intervention buying or subsidise dairy production, as four companies processed 1,400 tons of milk every day into products intended for Russia. For us, it is not important to receive the assistance today, but it is of utmost importance to know if there will be any assistance," said Bertašius.

He agreed that a reduced VAT rate could help dairy producers as well, as it would stimulate domestic consumption.

Meanwhile, Zofija Cironkienė, head of the Lithuanian Association of Vegetable Producers, fears that if the state does not provide assistance, some of the vegetable farms will go bankrupt. There are not many vegetable farms that export their production to Russia; however, smaller producers will sustain losses as their bigger competitors used to export their production to Russia, which will now flood the domestic market.

"It means that for smaller farms it will become more difficult to sell their production," said Cironkienė.

Virginijus Kantauskas, general director at meat manufacturer Biovela Group, admitted that Russia's ban was unexpected.

The company exports its production to 30 countries and so far does not plan to cut production; however, Kantauskas did not rule out the possibility of redundancies in the future.

According to him, the support of the state should be provided not to individual companies, but to the market itself; it could include such measures as subsidies and VAT relief.

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