Here's a nice how-d'ye-do! Alexander Tkachyov to tie the farmers to their land for a long term
The government of Russia will ban the short-term lease to avoid frauds with subsidies, thus boosting the coffers and saving lands from exhaustion
The Ministry of Agriculture is preparing to ban the short-term rentals of farmlands. The main motivation enshrined in the amendments to the law is to avoid 'the risks associated with an improper execution of duties by the tenants to reproduce the soil fertility'. However, the experts of Realnoe Vremya claim that the main goal is to stop frauds with subsidies and to increase the state duty revenues. At the same time, the amendments can seriously restrict the freedom of agricultural enterprises.
The Ministry of Agriculture is concerned about the risks associated with soil fertility
The Ministry of Agriculture of Russia is ready to toughen up the law 'On the turnover of agricultural lands'. In particular, the ministry is going to change the permissible term of agricultural land lease for the private lands. Now the lease of lands in state or municipal ownership is limited from 3 to 49 years. The private lands can be rented for a short term to 1 year.
'In many regions of Russia, there is a practice of the conclusion of land lease contracts for lands of agricultural purpose for a period up to a year, which creates risks associated with an improper performance by the tenants of their responsibilities to reproduce soil fertility, as well as other measures aimed at maintaining of the lands in the condition suitable for agricultural production,' Izvestia newspaper quote the text of the annotations to the draft law.
The law can come into effect in July 2017.
Opportunity for frauds or protection against them?
Despite the fact that the ministry cites the care of soil fertility restoration as the reason for the new law, it is about the elimination of frauds with subsidies and the state duty revenues increase. 'The Ministry of Agriculture wants to give subsidies, so it wants to secure itself to avoid frauds. The Ministry wants the land parcels were leased for a long term, but it is necessary to register the long-terms in the Registration Office,' said Nurvil Garipov, deputy director of the Department of land and property relations of Volga Anti-crisis Institute CJSC. 'Besides, the long-term lease contracts must be not only registered in the Registration Office, but also you must pay duties for that. For a short-term lease, the duty is not paid. However, Kamiyar Baitemirov, the chairperson of the Association of Farmers and Peasant Farmsteads of Tatarstan believes that a possibility of such savings is not very popular: 'What do you value — your business or a piddling state duty'.
A farmer Alyona Beloglazova says that this loophole is often used for other frauds, for example, to 'take away a contract from someone who works on land'. At the same time, we know that the farmers use this loophole as the protection against such actions as well. If there is another bidder for a land, state agencies must conduct a competition. Thus, there is an opportunity to blackmail a farmer threatening with a 'competition'. Therefore, the farmers sometimes prefer to negotiate with a land owner and to renew a lease every year, rather than go to the Registration Office and start a conflict with a possible 'competitor'.
'An owner should make their decisions on the terms of a lease by themselves'
However, Vladislav Novoselov, the managing director of BEFL audit-consulting company, notes that there are many situations when there is an economic feasibility to issue a short-term lease or an outright poverty: 'Two neighbouring agribusinesses 'exchange' lands for one or two agricultural seasons. It may be necessary and beneficial both for the observance of agricultural technologies and crop rotation, as well as for more efficient logistics. Another example. Once an owner decides not to process a land/field and conveys the land for rent to a person who wants to grow any culture in this area. In addition, the areas under perennial grasses, for example, even within a single agricultural season may be in the lease of different agricultural enterprises/farmers.'
Another example, according to Novoselov, can be the transactions of purchase and sale of land. Often in such transactions by selling a land long before the end of the agricultural season, a seller, for example, still needs to harvest. In this case, for the period until the completion of the harvest the land is leased to the seller.
Finally, Novoselov reminds that after all we are talking about private property.
'In our opinion, an owner should make their decisions on the terms of a lease by themselves, including the term,' says Novoselov. 'And if he considers it reasonable to transfer the land for lease for a short period — from several months to several years — his right should not be restricted.'
Benefits for the farmers
However, most experts see in the initiative more pros than cons.
'I believe that the ministry is doing the right thing: the long-term rentals – it is very good,' said Nurvil Garipov. 'For a short-term rental, an owner can always say: 'next year I will take away the land'. It is not profitable for a farmer — he has been cultivating a land, invested his funds. It is beneficial to take the land for a long-term lease — from three to five years.'
Kamiyar Baitemirov develops the idea: 'We said and say that the lease term must be not even three years. For agriculture, when a land is in turnover, three years is nothing. If we talk about the lease, the term shall be not less than 8-12 years. Probably, in this case, the Ministry of Agriculture of Russia is doing the right thing.'
According to the head of the Association of Farmers, there is nothing positive in that sometimes the land is leased for a short period in order to increase production in certain years: 'How can I create a sustainable business if the means of production leased for a year.'
Finally, Alyona Beloglazova says that the stated by the ministry motives should not be disregarded: 'It should be borne in mind that soil fertility — an exhaustible resource. If only to reap the harvest, not enriching and not fertilizing, it turns into a step, those who plan to work on the land all their life will not wring from it every last drop, and those who are planning to skim the cream and then move to another area, will not invest a penny to the enrichment of land, just will fill all the chemicals, growth stimulants, etc.'