Further sector reforms remaining on agenda of President’s Administration

January 6, 2021 00:25

Despite massive opposition from the fishery industry and a number of other stakeholders, the proposals of the Russian Fishery Company (RFC) to reform the sector’s taxation and boost the quota allocation efficiency still remain on the agenda of the President’s Administration, reports Megafishnet.com.

More specifically, on December 24, 2020, a dedicated meeting chaired by President’s Assistant Maxim Oreshkin was held to debate the issue raised by one of the leading fishing companies.  Following the conference where a report was delivered by RFC Board Chairman Mr. Gleb Frank, Oreshkin instructed all the participants to prepare comments by January 20, 2021.

The proposals were put forward by RFC as of advantage to efficient fishing companies which would get more quotas from less efficient ones to fully load newly-built vessels and onshore factories while producing more value per tonne of quota. Additionally, the government would get more money for the Tax Revenue.

According to VARPE (All-Russia Association of Fishery Enterprises, Entrepreneurs and Exporters), RFC also proposed to auction 100% of the crab quotas and transfer such valuable species as shrimps, whelks, sea urchins, etc. to stocks allocated versus investment obligations.

Other novelties include restrictions on fishing vessels' service life, stricter single agricultural (soft) tax qualification criteria and increased resource levies for the exploitation of aquatic biological resources.

Prior to the meeting, Kommersant had disclosed some more details. They have to do with possible ban of fishery in the Russian EEZ for vessels built at foreign yards more than 30 years ago and those lacking the facilities for deep and waste-free processing. This would enable a complete fleet renewal in the key segments while generating RUB 600 billion in investments and boosting the share of high added  value products from the current 20% to 80%. 

In order to fully load the newly built boats and factories the share of the investment quotas in the total allocated should be raised from 20 to 50% thus presumably increasing the proceeds by 20-30%  and profit by 50-100% per tonne of resource.  

According to a letter circulated by VARPE to its members in the wake, the Ministry of Agriculture did not totally support the plan during the discussion but called for the possibility of conducting auctions for the remaining 50% of the crabs’ TAC in 2023 and a second phase of the investment quota programme in 2022 (including Murmansk-led North Fisheries Basin). 

To give an idea of the value at stake, back in 2019 the first phase of the crab quota auctions generated more than RUB 142 billion (ca. USD 2.2billion at the then rate) for the government coffers and the winners’ obligations to build new crabbers at Russian yards.

The Federal Antimonopoly Service and SBERBANK (sector’s main creditor) have spoken out against all the four proposals submitted by RFC while the heads of Kamchatka, Murmansk and Magadan governments have followed suit rejecting the draft.

The plan has neither received support from main fisheries associations as historic quota users feared it would deprive them of valuable fishing rights worth many billions of rubles.

The conflict between RFC and most historic quota holders is so acute that the company was expelled from Pollock Catchers Association to be reinstated only at the close of 2020 in the wake of the respective ruling by Primorye Arbitration Court. With the expulsion the Russian Fishery Company (actually six fishing companies of the RFC Group) ran the risk of losing the MSC certificate should the Court have ruled otherwise.

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