With Crisis In Full Swing, Irrigation System Faces Bankruptcy

• National Land Development Agency (ANIF), insolvent l Irrigation system stricken by disaster as drought looms

• ANIF insolvent, facing bankruptcy

The National Land Development Agency (ANIF), the regulator of the irrigations market, has become insolvent and is facing bankruptcy following a lawsuit filed by a security company they once hired. In November 2008, the Bucharest City Court passed judgement in the lawsuit filed by S.C. Paza si Protectie Regent Security S.R.L. for overdue receivables. The court found that the security company"s claim was just and ordered an insolvency procedure against ANIF. Moreover, the court ordered a legal reorganization of ANIF and appointed AMCO IMPURL as provisional administrator. The court banned any reorganization plan and placed AMCO IMPURL in charge of ANIF"s affairs. Among others, AMCO has been tasked to create an inventory of ANIF"s assets, ensure their preservation and make a report to explain how things have come to the current situation.

Contacted by BURSA, ANIF Director General Nicolae Maracine stated it was not normal that a State institution be declared insolvent just like any commercial company. He stressed that the 290,000 RON debt to the security company had been fully paid. According to him, the contract had been signed before the beginning of his term and he was planning to sue the security company to recover the damages caused during the execution of the contract. "The damage they caused to us through the quality of their services is greater than the debt we"ve paid," Maracine told BURSA. "Everything is absurd from the beginning to the end," Maracine said, adding that ANIF was currently collecting evidence to prove that the services offered by the security company were simply rudimentary.

In turn, the security company begs to differ. S.C. Paza si Protectie Regent Security S.R.L. told BURSA that ANIF had not fully paid their debt. According to them, the security contract with ANIF was terminated some time ago. The court ordered the creditor list to be finished by 12 March 2009. One of the creditors is the National Land Development Company (SNIF).

• ANIF under audit

Agriculture Minister Ilie Sarbu has dispatched a team of auditors to investigate the situation, as well as other issues, even more serious. Inner sources are saying that the audit is focused on the maintenance contracts for the land development infrastructure which ANIF signed with a number of companies. The sources also say that some of the contracts were signed by ANIF subsidiaries, which did not have a legal persona at the time of the sign-off and had not been explicitly empowered to sign. The sources concluded that the documents were therefore null and void. The problems with the contracts were confirmed by Valentin Apostol, the Irrigations Advisor to Minister Sarbu. Although the news has not been confirmed officially, it appears that Nicolae Marcine resigned from his office as Director of ANIF on Friday.

• SNIF situation uncertain, too

After having been repeatedly rescued from bankruptcy at the very last moment by order of the minister of that respective time, the National Land Development Company (SNIF) has received yet another "breath of air" from Minister Sarbu, too. One of the first decisions made by the recently appointed Minister Sarbu was to extend the term of the administrative receivership of SNIF by six months without consulting the Competition Council, or the main creditor, which is the National Agency for Fiscal Administration (ANAF). Premier Boc"s decision to cut State-financed jobs caused 400 of SNIF"s 1,200 employees to lose their job, according to Administrative Receiver Stefan Constatin.

SNIF has branches in all counties of Romania and is the only company capable of emergency intervention. However, a 30% staff cut can cripple its capacity to intervene on a wide scale if needed. Nevertheless, Stefan Constantin explained that the company was ready for privatization and that all necessary documentation had been submitted to the single shareholder, the State Property Agency (ADS). Asked about SNIF"s detailed situation, Stefan Constantin explained that the company owed 67 million RON to the State, 8 million RON to various private creditors and an off-balance-sheet debt of 200,000 RON from the controversial agricultural programme Romag"98. The administrative receiver of SNIF added that the company had deeds only to 61 hectares out of a total surface of 210 hectares under its administration. SNIF also holds receivables worth 14 million RON. Constantin stressed that SNIF was ready to be privatized and added that the company had contracted land development works worth 6 million RON in 2008.

• National anti-drought strategy, in design phase for two years

Another urgent problem of the Romanian agriculture is the absence of a functional anti-drought strategy. The one posted on the Ministry of Agriculture"s website has been in the design phase since 2007. The only changes concerned the deadlines for the execution of some works. Former State Secretary Gheorghe Albu explained that 20 institutions with different proposals and approaches were currently working on the strategy to counter drought, precisely in order to prepare a successful medium- and long-term project. Asked during a press conference whether Romania did have a functional anti-drought strategy, Ilie Sarbu said "yes" and added that it would become operational through a law in the near future. In the meantime, the strategy will be reanalyzed and could be modified again, according to the Minister"s advisor, Valentin Apostol, who used to be the director of SNIF during Minister Sarbu"s previous term of office.

• Disaster-stricken irrigation systems

During the first press conference after his appointment as Minister of Agriculture, Ilie Sarbu said that Romania"s overall irrigated surface had decreased from 1,400,000 hectares in 2004 to 250,000 hectares in 2008. Considering that the overall potential agricultural surface exceeds 8,000,000 hectares and the portion which can be irrigated is about 5,500,000 hectares, the currently irrigated surface of 250,000 hectares speaks for itself. The ANIF website indicates that irrigation can increase crops by 30-50%, while irrigations combined with other means can double the crop, generating increased revenue for farmers. This year, the weather forecast indicates that the drought will start in March. This is the agriculture that is supposed to get us past the crisis.

• Ministry sets up crisis management unit

Agriculture Minister Ilie Sarbu has established, by law, a crisis committee dedicated to the national irrigations system. The committee includes representatives of ANIF, SNIF, LUAIR (the League of Irrigations Water Users In Romania), the Ministry of Agriculture and the World Bank, which financed the irrigations system reform programme of the Romanian Government.

Valentin Apostol said the Ministry was preparing two bills to solve ongoing problems. One will extend the deadline by which irrigations water users can apply for repairs on the irrigation systems from 30 November 2008 to 30 March 2009. "We hope to rehabilitate an additional 250,000 hectares by the beginning of the drought, that is, by end-March," he said. If so, Romania will have a total of 500,000 hectares of irrigated farming land. Apostol further explained that the second bill would solve a bureaucratic problem affecting irrigation water users.

Referring to ANIF"s legal problem, Apostol said it would not jeopardize the overall irrigations system. As far as SNIF is concerned, Apostol said solutions were being sought to convince the European Commission to agree that SNIF should continue to work with ANIF for specific projects. Apostol confirmed that SNIF was in a difficult position because of large debts to the State and that it was not able to participate in tenders organized by ANIF specifically because it was indebted to the State. Consequently, SNIF is forced to enter joint ventures with third parties, which are eligible to participate in tenders organized by ANIF, and therefore split the profit with them.

On the other hand, the World Bank"s presence on the committee is not a matter of chance, as the Government has borrowed 80 million USD from the WB to finance the reform of the irrigation system. The agreement led to the promulgation of the Land Development Law, which reorganized the irrigation system and stipulated the sale of SNIF as economically viable pieces. The law also stipulated the establishment of the National Agency for Land Development (ANIF). The failure to sell SNIF leads to a breach of the agreement. Therefore, the land development sector and agriculture in general is not exactly pink.