LFA surprised by millions of euros in proposed support for dubious purchases
The Ministry of Environment is preparing a support measure for farmers of dubious quality to encourage the purchase of "second generation" biofuel and electric agricultural machinery. The description of the financing conditions has already been submitted for public consultation and the Lithuanian Agricultural Machinery Association (LMAA) has already pointed the finger at the flawed nature of the measure.
High tax burden for farmers
The description of the conditions formulated shows that it aims to address the reduction of diesel fuel consumption, which would supposedly also help to address the reduction of greenhouse gases (GHGs), but in reality, as the LFA points out, it will only be a reduction in the amount of labelled („green“) fuels that are subject to the excise tax reductions. In other words, the tax burden on farmers will increase.
LFA argues that "if farmers are short of labelled diesel for agricultural production, they will buy the same diesel, only unlabelled. Thus, the problem is not really being solved, but only exacerbated by increasing the cost of agricultural production, – believes the association. „It must be understood that diesel has been, is and will be for a very long time an indispensable fuel source, especially for large, heavy agricultural machinery“.
LFA believes that most self-propelled agricultural machinery (tractors over 100 hp, combine harvesters) will remain diesel-powered, and that it is therefore necessary to encourage the phasing out and elimination of such old, polluting machinery, which is 20 to 40 years old.„We believe that it would be appropriate to encourage the purchase of new agricultural machinery (especially tractors) that meets Euro5/6 standards. Such new machinery is clean, environmentally friendly and has significantly lower GHG emissions," the association stressed.
No one has developed the right machinery
An arrow of criticism is also aimed at the fundamental support, i.e. that the project promotes the purchase of biofuel- and electricity-powered agricultural machinery.
„We cannot compare productive agricultural machinery (tractors) with electric vehicles, etc., because their purpose is to work continuously, continuously in different seasons, over large areas and for long periods“, – the association says, and adds that „to date, no one has developed such agricultural machinery, and if they have, it is isolated and without the huge infrastructure needed for it“.
According to the LFA, if Euro 5/6 self-propelled agricultural machinery is allowed, the main objective of the measure to reduce GHG emissions will be automatically achieved: moving from the old tractor to the Euro 5/6 tractor.
The size of the funding per project
Among others, the association was surprised by the principles of financing the measure. The measure will provide €7 million and will allow beneficiaries to apply for up to €1 million per project. This means that only 7 applications will be able to cover the full amount of funding.
„Now, the total fund for the call is 7 million and one application can apply for up to €1 million. If it is the farms that will be seeking EUR 1 million in support and indicate that they will use biogas tractors in their operations, we believe that the Project does not check any links between farms, it does not even check the production potential or whether the farm really needs both the support and the number of tractors or other pieces of agricultural machinery," LFAA stressed.
„There is no mechanism in place for the bogus use of support, especially for biogas-powered tractors, when it is publicly known that none of the farms have a ready infrastructure. Won't such acquisitions be bogus and only benefit narrow interests," LFA asks.
Indirect reference to big business
The risks listed in the article – are an indirect reference to large agribusiness groups that own more than one agribusiness company.
For example, companies belonging to „Agrokoncern“ or the „AUGA group“, which is going through a difficult time, could easily benefit from this support.
„Agrobite“ recalls that at the beginning of October it was revealed that one of the companies of the „AUGA group“, „AUGA tech“, had sought to receive €60 million in funding from the „AUGA group“. EUR loan through ILTE (formerly „Invega“) to invest in the development of the production of „Auga M1“ biomethane- and electricity-powered tractors, the prospects of which have been strongly questioned by the LFA.
Then ILTE informed „Agrobite“ that it was assessing the risks of the applications and that no decision had yet been taken on the „AUGA tech“ application. „No decision has been taken at this point in time on the loan application submitted by „AUGA tech" under the „Milijardas verslolui" financing instrument. The application is under evaluation," Viktorija Voroncova of ILTE said on 9 October.Investors' Association chairman Vytautas Plunksnis previously told the media that „AUGA group“ lacks money to cover debts – has breached obligations to creditors.
The „Agrobite“ answered „AUGA group“'s questions in a laconic manner.
„The questions you have sent are biased and aim to artificially pursue a topic that is favourable to interest groups. We have made our comment on this topic publicly and will not comment further on these questions"," Kęstutis Juščius replied in his letter.
Starting restructuring
Some time later, „AUGA group“ announced that it is starting to restructure and intends to double its operating costs by 2027 and to divest some of its businesses and assets. The group plans to merge or close up to 60 companies.
„AUGA group“ CEO Kęstutis Juščius has said that „Auga Group“ will also discontinue the development of innovative agricultural technologies and will engage in normal agricultural activities.
Moreover, when Kęstutis Juščius announced last Monday that the Group had managed to reach an agreement with the bondholders on the redemption of the bonds, the latter's lawyer denied this information.
On Monday, Kęstutis Juščius, shareholder and chairman of the board of directors of „Auga group“, called the decision of the bondholders to redeem the bonds on time by 17 December insignificant.
ILTE no longer comments on the fate of the application
When contacted again by Agrobitei“ about the fate of the „AUGA tech“ company's application, ILTE's representative V. Vorontsova on Wednesday already tried to evade an answer.
„Given that the company is listed, any comments by ILTE on the application could affect the share price, so we still suggest contacting the company directly,“, – said V. Vorontsova.
„Agrobite“ did so, but no comment was received from „AUGA group“.
It is still difficult to say whether the Ministry of the Environment's planned purchase of second-generation biofuel- and electricity-powered agricultural machinery may have anything to do with the events surrounding the „AUGA group“ in recent months. However, both the "AUG group" application to ILTE and the inventory now being prepared by the Ministry of the Environment raise all sorts of questions.
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