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Dairy

04/ 07/ 2012

As a result of EBA’s lobbying efforts the President of Ukraine Victor Yanukovych vetoed the Law on Amendments to the Article 3 of the Law of Ukraine on State Support of Agriculture of Ukraine regarding regulation of milk purchasing prices (“Law”) with the proposal to decline it.

Background: on 7 June 2012 the Verkhovna Rada of Ukraine adopted as a whole the Draft Law №10456 on Amendments to the Article 3 of the Law of Ukraine on State Support of Agriculture of Ukraine regarding regulation of milk purchasing prices which contained a number of negative and even dangerous provisions which could harm not only the milk-processing companies but the overall dairy industry. In particular, the Draft Law envisaged including raw milk and all dairy goods into the list of goods subject to state price regulation, performing payments for the delivered milk within 7 days from the date of its acceptance and mandatory signing of written contracts for milk and dairy goods purchases.

The main risky consequences in case of President’s signature of the Law stressed by EBA Dairy Committee were the decrease of dairy goods quality due to the forced cheapening of production costs, dairy goods sales decline and retail prices increase, loss of competitiveness of fair producers, reduction of investment attractiveness and the amount of working places in dairy industry.

Mandatory requirement to sign written contracts for milk purchases, especially with the individual households which are around 1.5 million nowadays, could lead to the increase of administrative costs and forced purchases of milk through intermediaries because of lack of qualified personnel and legal experience. Also, the requirement to perform the payments for the delivered milk within 7 days from the date of its acceptance could have a negative impact on the financial state of milk processors, their working capital as well as on the production levels due to the decrease of raw milk purchases and investments reduction into the development of dairy industry (i.e., extension and modernisation of production facilities, quality improvement, distribution systems upgrade etc.). On top of that, state intervention into price regulation of dairy goods and into contract relations between sellers and buyers contradicts not only with the domestic legislative norms but with those of the EU and Russia and would place the Ukrainian producer into unequal conditions, thus causing further lag of dairy industry development compared with other countries.

Considering the abovementioned, EBA Dairy Committee was taking a lot of efforts in order to prevent the Law’s entry into force, in particular, through a number of meetings, letters and appeals to the President, representatives of Presidential Administration, Government, Parliament, as well as participation in the relevant press-conferences and public hearings.

We are glad to inform EBA members that on 3 July 2012 the President of Ukraine has returned the Law on amendments to the Article 3 of the Law of Ukraine on State Support of Agriculture of Ukraine regarding regulation of milk purchasing prices to Verkhovna Rada with the proposal to decline it, in accordance with the Chapter II of Article 94 of the Constitution of Ukraine.

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