I expect nearly a 100% absorption of funds this programme period
Host: The European Commission approved a notification for transferring 400 million BGN from the Rural Development Programme to municipalities. What was the proposed change?
Rumen Porozhanov: This is the 9th modification of the Rural Development Programme (RDP). Two municipal measures and one major private measure from the RDP received extra funds.
Host: This is nearly half a billion BGN. Could you explain the risk would have been if the EC hadn’t approved the notification?
RP: The risk was justified because our analysis showed there weren’t any reasons for rejecting the notification. Last year, we contracted 750 million BGN for municipal roads, sewage systems, sports facilities and church and monastery renovation. Of those, 400 million BGN were contracted on the condition that the funds would be available when the EC approved our notification. We allowed municipalities to begin their public procurement procedures because the process takes a long time. The good news is that the EC approved the changes in full and last week we signed annexes with the municipalities, which removed all conditions.
Host: How many municipalities?
RP: 93 municipalities and about 120 contracts. We gave them the green light to implement their investments.
Host: Are there any other risky funds and notifications on which you are expecting a decision?
RP: The Ministry of Agriculture and Food will be making a new proposal soon. It is about restructuring funds within Axis 2, which includes green measures. Our prognosis is that the funds for agri environment will not be enough now that we introduced the popular crop rotation measure to grain producers.
Host: In previous conversations, you claimed that there wasn’t enough interest in the green measures.
RP: The problem is now solved. The ministry worked very well and now we will actually have to transfer money to the agri-environment measure from other Axis 2 measures. This leads back to your question about risky funds. Within the RDP, I expect a full absorption of funds this year and in 2014. In 2015, when we balance the accounts, there may be some discrepancies because some contracts may not be implemented in full. This is why we are now carefully overcontracting funds. This is done using an analysis on each measure.
Host: So you expect Bulgaria will absorb all agriculture funds for the 2007-2014 period?
RP: Correct. I would like to mention some numbers. So far, we have a 98% absorption rate under the European Agricultural Guarantee Fund (EAGF). This year, we need to pay out 580 million euro and I am confident we will absorb all funds. Under the RDP, we have 3 separate budgets of 400 million euro each that remain to be absorbed. My expectations are that we won’t have problems this year and in 2014. I can’t commit to an exact per cent, but RDP absorption will be close to a 100%.
Host: How many applications did you receive during the application period for non agricultural activities and rural tourism that just finished?
RP: These are measures 311 and 312. I don’t know the exact number of applications. But the entire budget of 90 million BGN for measure 311 and 50 million BGN for measure 312 was claimed in the first 3 days of application. The projects will now be ranked. Fortunately, the ranking criteria are very clear. I think the candidates claimed subsidies that exceed the budget 3 to 4 times. I expect the remaining application periods will be similar.
Host: You will open the RDP measure for modernizing agriculture holdings in June.
RP: This is measure 121. The budget will be about 43 million euro. Right now, the ministry and SFA are formulating the decree because we have both a specialized budget and a general budget. I think we will have the decree next week and the application period will begin in the second half of June. In July, we will open the application period for municipal measures 321 and 322.
Host: In February, a payment of 800 million BGN to farmers caused worries to the minister of agriculture and food, who wasn’t sure Bulgaria’s budget would be able to take such a hit. In hindsight, did he really need to worry?
RP: We have never had problems with reimbursements from the European Agricultural Guarantee Fund. We paid on February 20 and received the full amount back on April 4 – 840 million BGN. So there was never any risk for this payment. Moreover, each November we have an EC audit mission that examines our map of eligible lands and it made no remarks for years 2011 and 2012. On the contrary, our map was evaluated as very reliable and a good basis for direct payments.
Host: After so many years of direct payments, are there still problems with overlapping lands, ownership arguments, etc?
RP: There are always problems, but we have solved the issue with overlapping lands as far as procedures go. This year, we paid an additional 60 million BGN in direct payments for overlapping lands after reviewing farmer appeals to the Ministry of Agriculture and Food.
Host: According to an analysis by the Institute for Market Economy, direct payments have increased arable lands and the price of land with about 175%, and decreased the amount of abandoned lands. Do you find the claims reasonable?
RP: I don’t have any alternative data, but the analysis is, overall, correct. Agriculture is one of the leading sectors in Bulgaria.
Host: However, the same analysis states that Bulgaria should not keep the current mechanism of direct area payments because it no longer benefits agriculture and should use the single payment scheme and allocate more money to programmes like rural development.
RP: This will happen because Axis 1 will be different in the new programme period. Direct payments will make up only 40% of all payments and there will be funds for small farmers and schemes coupled to production. We will also have green payments in both Axis 1 and Axis 2. I would like to go back to the budgeting. I already said we will absorb close to 5,3 billion euro by the end of this programme period. Our budget for the next period is about 7,5 billion euro. To us, it is important to propose a Rural Development Programme plan that corresponds to our interests by Christmas so we can start implementing it, at our risk, as early as the beginning of 2014, while waiting for its approval.
Host: What are the most important issues Bulgaria must negotiate as part of Common Agricultural Policy discussions?
RP: They are mainly related to the EAGF, or Axis 1. Something very important is the per cent of funds going to coupled schemes because they support stockbreeders, fruit and vegetable producers, etc. Bulgaria wants a 15% ceiling there. Those sectors need support because, when we reach the payment levels of old member states in 2016, we will no longer be able to give complementary payments and state aid from the national budget and will only rely on coupled schemes.
Host: So let us repeat the most important points – Bulgaria will use a 100% or almost a 100% per cent of its EU agriculture funds for the 2007-2013 programme period?
RP: Yes, I could say that.