A press breakfast with Viktor Evtukhov, State Secretary – Deputy Minister of Industry and Trade of the Russian Federation, was held in Moscow. The Deputy Minister summed up the results of the year for the supervised industries, with particular attention to the timber industry.
The Ministry of Industry and Trade of Russia continues to provide both regulatory and subsidiary support measures for the creation of new industries. As of today, the implementation of the mechanism of priority investment projects has allowed to create new capacities for manufacturing the export and import-substituting products and to reach a fundamentally new level in the industry. PIPs have already been proving their effectiveness for 10 years and allow to provide investment projects with forest resources on a non-auction basis and actually at minimum rates for the lease of forest areas. It is estimated that the costs for the investor are 5-8 times lower than the market value of wood. Such projects not only facilitate the active development of the industry, but also provide employment for a significant number of specialists.
As of today, the list of priority investment projects includes 157 projects with an estimated cutting area of 86.8 million cubic meters. 41 projects have been implemented, 71 project have already been completed. The summary volume of investments in the timber industry of Russia exceeded 430 billion rubles.
Replying to a question regarding the control of investors in the framework of priority investment projects, the Deputy Minister said that the mechanism of the decree stipulates that the main burden of control should be regarded as resting on the region. However, the Ministry of Industry and Trade of Russia began a large comprehensive audit of all projects in 2019. It turned out that a significant part of the violations was committed by the actors themselves: they do not always personally check the construction of new enterprises, do not track rent payments for the timber, and provide progress reports at the wrong time and poorly.
Employees of the Ministry of Industry and Trade inspected 16 projects for six months throughout Russia from the North Caucasus to the Far East and identified a significant number of violations. In the most severe cases tough decisions have been made: projects were excluded from the list.
“Separately I would also like to highlight that decree of the Government of the Russian Federation No. 190, which describes the procedure for granting benefits for the use of the forest areas (from 3 to 10 years, depending on the investments in the project) came into force on 08 March 2018. The investor shall be allowed to the forest logging when there is less than half a year left before the start of processing operations. In May 2019, the minimum investment requirements were changed from RUB 500 million to RUB 2 billion for projects involving the upgrades of capacities and from RUB 750 million to RUB 3 billion for new production projects. Both regions and investors now understand the seriousness of the requirements for PIPs. And the Ministry of Industry and Trade will continue to control firmly the timber processing complex,” Viktor Evtukhov added.
In particular, Deputy Minister stressed that 14 priority investment projects with total declared investments of 32.1 billion rubles are being implemented in the Far Eastern Federal District, thereby lumber, slab, veneer, parquet, cardboard and biofuel are manufactured and up to 8.7 million cubic meters of wood is processed. At present, 5 projects have been built and commissioned with a total investment of about RUB 14.7 billion.
The Ministry of Industry and Trade of Russia pays special attention to the Far Eastern Federal District, from which about 42% of harvested wood products is still exported abroad in unprocessed form. According to the order of the Plenipotentiary in the Far Eastern Federal District Yuri Trutnev, the Ministry developed a draft decree of the Government of the Russian Federation “On Amendments to Decree of the Government of the Russian Federation of 12 December 2017 No. 1520” in order to stop uncontrolled mass logging and reduction of the round timber export of the Far East.
In 2018 this decree established a tariff quota for the export of round wood of Far Eastern wood species (Ayana spruce, white bark fir, and Dauric larch) applied to the enterprises with processing capacities, and which export timber products. The Ministry of Industry and Trade of the Russian Federation lowered the export duty rate for such enterprises, bringing the amount of 13% (with an annual total quota for export of 4 million cubic meters).
The rest of the production facilities of the Far East got a possibility of creating timber processing facilities and the deferred step-by-step implementation of increased rates for export customs duties outside the quotas is provided: 40% in 2019, 60% in 2020, and 80% in 2021.
As a result of the measures taken, 9 months of 2019 demonstrated a negative tendency of unprocessed timber export volumes from the territory of the Far Eastern Federal District: a decrease of 27% against 9 months of 2018.
In addition, in order to export timber that is not currently processed in the Far Eastern territory, the Ministry of Industry and Trade of the Russian Federation has prepared and sent to the Government of the Russian Federation a number of amendments to Decree No. 1520 regarding the removal of low-quality balance timber from the quota and establishing the export customs duty rate of 0%.
There are also great prospects for the implementation of projects on creation of pulp and paper mills: the pulp and paper industry provides the deepest processing of wood, and the demand for its products grows every year. The Ministry of Industry and Trade of the Russian Federation is currently considering several potential investment projects for the creation of pulp and paper mills with a total investment volume of over 420 billion rubles and the planned output of finished products in the amount of 3.3 million tons of pulp per year.
Also among the effective measures of state support for the timber industry Viktor Evtukhov noted: privileged lending financed by the Industrial Development Fund; refund of a part of the product transportation costs (Decree of the Government of the Russian Federation No. 496 of 26 April 2017); provision of privileged lending to companies that have corporate competitiveness programmes in place (Decree of the Government of the Russian Federation No. 191 of 23 February 2019).
The issue of imposition of private ownership for forest areas was also raised at the press breakfast. Today, this is one of the essential issues for Russian companies. The imposition of forest ownership will help to ensure a collateral component to obtain preferential loans for the construction of plants, and certain guarantees for the state that the owner will take care of the site he purchased. This includes reducing the share of forest fires and a more responsible approach to the reforestation. But at the moment, the Deputy Minister considers that this issue requires extensive discussion with all interested parties.