Albert Karimov: ‘It’s been our worst half in the last four years when we have been at a loss’

Smaller output with good start

The management of the republic summarised the performance of the industry and payments made to the Tatarstan budget for seven months this year in the Cabinet of Ministers of Tatarstan on 25 August. President of the republic Rustam Minnikhanov noted key indicators.

• Gross output has totalled 98,5% compared to the same period last year, the industrial production index is 98,2%.
• Oil production has decreased by 10,8%, decline in petrochemistry has totalled 4,9%, in mechanical engineering — 9,4%.
• At the same time, the head of the republic noted that numbers in oil refining had grown by 13,9%, by 18% in food production and it had been equal to 5,2% in processing industry. Construction works have been 99,2% against last year, retailing has been 92%.
• Rustam Minnikhanov paid attention to a significant reduction in payments made to the republican budget — by 20,3% or 34,2bn rubles. The payments have totalled 134bn rubles for seven months. Income tax has plunged almost twice, by 30bn rubles.
• The republic sold products for 1,46 trillion rubles for seven months, which is below last year’s level by 10,5%. The minister noted that Tatarstan bounced back to the level of 2018.
• According to the speaker, gas and electrical energy consumption has dropped by 18%-19%, retail turnover has reduced.
• E-commerce has almost tripled. Retail e-commerce in the first half of 2019 was 1%, about 5 billion rubles, this year it has grown to 3,6%, or 15 billion rubles.
• The republic’s export reduced from $6,1bn in the first half of 2019 to $4,5bn this year. “Obviously, the borders closed, which became one of the reasons for the reduction in oil exports as well,” Albert Karimov noted. According to him, non-feedstock and non-energy exports have also diminished, though insignificantly.

Minister of Industry and Trade of Tatarstan Albert Karimov examined indicators of different sectors in detail.

“It’s our worst half in the last at least four years when we have been at a loss. But there was a good start in January-February — 103%-106%. The reduction began in April-May. We’ve seen some revival since June, this is why the industrial production index has been 98,2% in the last seven months,” the speaker explained.

Oil production has been affected the most

However, the situation is unclear inside the sectors. Oil production has been affected the most. The OPEC+ international deal and limited oil production as well as the catastrophic fall in oil aggravate the situation, Karimov stated.

By interim estimate, 3,17 million tonnes of oil will be produced in Tatarstan this year, which, as the speaker notes, is below the level of previous years when 36 million tonnes on average were made. Oil sale volumes in rubles have returned to the level of 2016.

“The price is rebounding, but the amount of oil production isn’t growing and is about 80% because of the restrictions imposed on Russia,” the head of the ministry stressed.

He sees a more positive picture in oil refining and even noted the growth of volumes. The total output planned to be 18,2m tonnes will exceed last year’s, which was 17,4m tonnes.

Though there is still a fall in this sector after the crisis, the company is trying to keep it. The industrial production index in oil refining was 116% in the first half, first of all, thanks to rapid growth in the first quarter, Karimov noted.

As he said, the fall in numbers in the chemical industry below the 2018 level happened because of a decline in world prices. However, demand is recovering inside the sector.

Who found new niches took advantage of pandemic

Karimov called the situation in polymer refining as well as rubber goods, including tyres, positive. The industrial production index in this segment totalled 111% in the first half. KAMATYRES showed a rise by 173% in February after it recovered the volumes amid last year’s fall.

A complicated situation has been observed in mechanical engineering since 2018. Unfortunately, it worsened in April-May, there has been a recovery since June. In July, the segment showed 115% growth of volumes — there were sold products for 280bn rubles, the minister noted. KAMAZ has had the biggest growth. Despite the closed borders, some enterprises managed to take advantage of supporting measures, augmented volumes by adapting to the market’s new needs, new tyres. Some set up the production of hazmat suits, masks, tests, recirculators.

The head of the ministry noted two tendencies in woodworking. According to him, paper processing, cardboard producing companies have taken advantage of the pandemic. Wood and furniture production has been affected. But there is some stabilisation now, demand is coming back.

The high demand for medication and goods provided 40% growth. By the end of the year, the segment will stagnate, the minister forecasts. He noted recovery of pent-up demand for products of the light industry.

“It is important that we managed to prevent significant lay-offs, we’ve saved our staff,” Albert Karimov noted. At the same time, he noted that this fact influences another indicator while numbers are falling — the balanced result that was 47bn rubles in the first half and reduced almost by three-quarters compared to last year (about 200bn rubles). “And it is the most important source of profit, the expenditure of the republican budget, sources of further investments,” the minister reminded the audience.

Budget is forecasted to lack about 50 billion

Finance Minister Radik Gayzatullin said that income tax accounted for the main share of the budget — 36,5%, and this indicator decreased significantly: from 63,6bn rubles (last year) to 33,7bn rubles this year.

Big taxpayers account for 85,6%, or 25,6bn rubles, of the total amount of tax, the minister of finance noted. The deviation from the plan in other enterprises has been 14,4%, or 4,3bn rubles. Oil companies have more serious falls in income tax — by 19bn rubles, or 67%.

The backlog of income tax collection will probably amount to about 44bn rubles from the forecasted number by the end of the year, Radik Gayzatullin assumed.

Natural persons’ income tax is evaluated at 76,8bn rubles till the end of the year with a fall by 5,4bn rubles, or by 6,6%.

Payments made to the consolidated budget in all types of taxes are estimated at 231bn rubles with planned 279bn rubles. The fall is considered to be about 49bn rubles.

Backbone enterprises also find it hard to get support

Albert Karimov talked about 63 federal anti-crisis measures, enterprises in Tatarstan used some of them.

Backbone enterprises were given preferential credit to replenish their working capital, industrial companies received 5 billion rubles, enterprises in Tatarstan got 7bn rubles in total. In Anti-Epidemics programme, the republic was given 150m rubles for 1% credit — those who make medication are receiving this support now. Nine enterprises received 382m rubles at 2% a year as credit to resume their activity.

Almost all mechanical engineering companies in the republic used the effective tools stimulating demand, the speaker said. According to him, compensation, which is the most useful for exports, goes on — up to 80% of costs on the supply of products to external markets.

Albert Karimov paid attention to the fact that not all backbone enterprises managed to receive some support. For instance, the criterion “30% reduction in volumes for three months” requires a lot of reports — companies also received help to prepare the documentation. The head of the ministry said that the sector was expecting a legal framework for the adopted bill on capital investment protection, which guarantees companies’ investments in the future.

At the end of the meeting, enterprises’ directors shared what they did to survive the crisis. Director of TagraS-RemService PLC Ayrat Zakirov said that a lot of clients refused the company’s services during the self-isolation period, about 2,000 people, half of the staff, lost their jobs. Then the enterprise began to look for a solution and did it together with Tatneft — they began big repairs of wells, found orders outside the republic, trained specialists in related jobs. Moreover, the enterprise creates a clear algorithm of how to work with people, salaries, merchandise during a crisis, what to do with other contractors, transport, constant costs.

Director General of YelAZ JSC Kamil Galimov said that during the tough period the company found new outlets in the “near abroad”, began working to expand the range of machinery, including road machinery.