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Business “for” the liquidation of the grain guarantee fund

15/ 02/ 2021
  The European Business Association welcomes the initiative of the Mineconomy to liquidate the Guarantee Fund (GF) for the fulfillment of obligations under grain storage documents. On January 14, 2021, the relevant draft law №4592 was registered in the Verkhovna Rada, which provides for the repeal of provisions of the legislation relating to the Guarantee Fund. This week, the Verkhovna Rada Committee on Agrarian and Land Policy will consider the draft law. The EBA grain business community hopes for the full support of the deputies for this initiative. After all, as of today, according to business representatives, the Guarantee Fund was created only on paper, and in fact, it has not started functioning. Besides, in the proposed form, the fund does not meet the modern realities and expectations of the grain market. It will be recalled that the creation of the GF was provided by the Law of Ukraine №5493-VI dated November 20, 2012. The main purpose of this Law was to introduce a mechanism that guarantees the reimbursement of the cost of grain to the owners of storage documents if the grain warehouse fails to return the grain transferred for storage. By this, grain storage documents could become an attractive tool for lenders and, as a result, provide access to cheaper loans for small and medium-sized farmers. However, forcing grain warehouses to take up a significant material burden would lead to a sharp increase in the cost of services provided by grain warehouses. In this case, the grain warehouses would include in the tariff the amount of money equivalent to deductions they would possibly pay to the GF. First of all, it would negatively affect the profits of producers. Thus, the creation of GF in the format provided by the Law of Ukraine №5493-VI is impractical and would lead to a number of negative consequences.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

The European Business Association welcomes the initiative of the Mineconomy to liquidate the Guarantee Fund (GF) for the fulfillment of obligations under grain storage documents. On January 14, 2021, the relevant draft law №4592 was registered in the Verkhovna Rada, which provides for the repeal of provisions of the legislation relating to the Guarantee Fund.

This week, the Verkhovna Rada Committee on Agrarian and Land Policy will consider the draft law. The EBA grain business community hopes for the full support of the deputies for this initiative. After all, as of today, according to business representatives, the Guarantee Fund was created only on paper, and in fact, it has not started functioning. Besides, in the proposed form, the fund does not meet the modern realities and expectations of the grain market.

It will be recalled that the creation of the GF was provided by the Law of Ukraine №5493-VI dated November 20, 2012. The main purpose of this Law was to introduce a mechanism that guarantees the reimbursement of the cost of grain to the owners of storage documents if the grain warehouse fails to return the grain transferred for storage. By this, grain storage documents could become an attractive tool for lenders and, as a result, provide access to cheaper loans for small and medium-sized farmers.

However, forcing grain warehouses to take up a significant material burden would lead to a sharp increase in the cost of services provided by grain warehouses. In this case, the grain warehouses would include in the tariff the amount of money equivalent to deductions they would possibly pay to the GF. First of all, it would negatively affect the profits of producers. Thus, the creation of GF in the format provided by the Law of Ukraine №5493-VI is impractical and would lead to a number of negative consequences.

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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