"Subsidized" fertilizers intended for domestic agriculture get exported

Most of the fertilizer produced domestically using subsidized gas gets exported, because Romanian farmers can"t afford to buy them. Farmers say they haven"t received subsidies on time and that only one third of the sown areas this autumn received fertilizers. They are outraged that "subsidized" fertilizer gets exported.

The question now arises of whether it makes sense to extend the temporary measure of allowing all temporary consumers to buy only domestically produced gas in the summer, at half the price of imported gas. Opinions appears split. The chairman of InterAgro, Ioan Niculae, claims that this temporary government measure needs to be renewed in 2010 and it needs to be complemented by subsidies for farmers aimed specifically at the purchase of fertilizer. This year"s decision was only beneficial for the chemical industry by preserving thousands of jobs.

Viorel Matei, the chairman of the National Federation of Agricultural Producers (FNPAR), said: "It"s to be expected that a lot of farmers are unhappy with the impossibility of acquiring cheap fertilizer. Some say that the gas used as raw material is immoral as long as the fertilizer producers export their output. The big picture needs to be considered because the Romanian fertilizer makers need to survive. Imports are not going to solve the issues of farmers. The measure needs to be maintained next year, provided farmers receive their subsidies on time. What"s more, now more than ever it is necessary for the state to change the rules for the payment of VAT upon cashing the money and not upon issuing the invoice, like the current rule is. If the authorities will take on this brave measure, there will be enough liquidity in the system and the economy will resume growth".

Tudor Dorobanţu, secretary general of Agrostar, is more radical, demanding that the issue be dealt with swiftly: "We want to know if the state is still interested in supporting agriculture and the domestic fertilizer production. It"s obvious that the domestic fertilizer industry is in a critical state. We backed the idea of buying only domestically produced gas for a limited period of time. But the lack of money in agriculture made it impossible for farmers to acquire the needed fertilizer. It is immoral to support the fertilizer industry, which has been privatized for the most part, while not supporting farmers. I am referring to subsidies which are in place all across Europe. Medium and large farmers were the only ones who could afford fertilizer this autumn, and they are only a fraction of the entire industry". He said that the state needs to make an important decision on how it is going to support agriculture and that any steps taken need to actually produce results.

Liviu Voinea, the chairman of the Applied Economics Group (GEA), says that energy subsidies are only efficient when they target consumers that need support directly. In his opinion, if the authorities had subsidized fertilizer purchases by farmers, then production wouldn"t have required additional subsidies. Or, subsidizing the industry while neglecting consumer protections failed. Mr. Voinea said: "Everywhere in the world, subsidizing vulnerable categories of consumers, came in the context of free markets. Essentially, prices form freely, and governments make sure they directly protect consumers who need it. Any other type of intervention distorted the markets".

All the chemical fertilizer plants were active this summer, thanks to the temporary measure by the government for interruptible consumers, which only allowed them to buy gas from the domestic production for six months. According to recent statements by the chairman of InterAgro, Ioan Niculae, last year the price of urea was USD 850 dollars/ton. He says that this year, the price of fertilizer dropped to USD250/ton and even after such a drop, domestic farmers still can"t afford to pay the price.