Farmers from Temporarily Occupied Territories are Offered Priority State Financial Support

Ukraine plans to change the approach to providing state support to the agricultural sector by introducing priority for enterprises that were forced to relocate from temporarily occupied territories or lost production capacities due to hostilities. The draft law No. 15363 provides for the launch of an automated mechanism for calculating aid through the State Agrarian Register.

The need for amendments is caused by the consequences of the war for the agricultural sector. Some agricultural enterprises were forced to leave their assets, including equipment, machinery, and real estate, in temporarily occupied territories. Currently, agricultural producers who suffered losses due to the war formally have the same conditions for accessing state support from the State Budget of Ukraine as enterprises that continue stable operations in government-controlled areas.

However, in practice, these provisions do not take into account the real circumstances faced by the affected business entities. Due to the loss of production capacities and the need to restart operations from scratch, these enterprises find themselves in a significantly more difficult economic situation.

Therefore, there is a need to introduce a priority mechanism for providing state support to such enterprises, as they are the ones most in need of budget financing to restore production and stabilize operations.

What will change

The draft law provides for a priority mechanism of state support for agricultural enterprises affected by the armed aggression of the Russian Federation.

In particular, it is proposed to supplement part one of Article 16 of the Law of Ukraine "On the Development and State Support of Small and Medium Enterprises in Ukraine" with a provision according to which agricultural producers who were registered in temporarily occupied territories and re-registered in government-controlled territory of Ukraine, as well as those whose production capacities were destroyed or damaged due to military actions, are granted priority in all types of financial state support.

Similar changes are proposed to be made to the Law of Ukraine "On the Principles of State Agrarian Policy and State Policy of Rural Development." Specifically, it is established that the state ensures priority provision of state support to such categories of agricultural producers, and financing of other applicants is carried out only after full satisfaction of priority recipients' applications.

The draft law introduces a new article defining the specifics of state support for agricultural producers affected by the war. According to it, such entities have the right to priority satisfaction of applications for state support, provided they meet the legal requirements.

At the same time, the introduction of a "priority support limit" (PSL) mechanism is envisaged, which is automatically calculated by the information and communication system "State Agrarian Register" using the formula: PSL = 3×MTL×K – OverPSL.

In the formula:

• MTL - is defined as the sum of taxes and payments paid by the agricultural producer for the last three years before the occupation of the territory or destruction/damage of production capacities,
• K is a correction coefficient that takes into account the ratio of the value of lost assets to the total book value of the applicant's property,
• OverPSL is the amount of priority state support already received.

It is also provided that an application for state support can be submitted both under the conditions of priority satisfaction within the PSL and in the general order, while support received in the general order is not counted within this limit.

The draft law also provides for the possibility of advance financing of investment projects for agricultural producers entitled to priority state support.

Agricultural producers implementing an investment project that meets the criteria established by the Cabinet of Ministers of Ukraine can use this mechanism, provided the project is co-financed by a bank in the amount of at least 30% of its cost (unless the government sets a lower percentage for certain types of support).

In this case, state support may be provided in the form of advance financing, i.e., prepayment from the state budget funds for goods, works, and services necessary for the implementation of the investment project. The procedure for such advance financing is to be determined by the Cabinet of Ministers of Ukraine.

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