Ukrainian agricultural producers to receive UAH 4 bln subsidies in 2017

The Ukrainian government has agreed on the distribution procedure of subsidies to agricultural producers in 2017, the total amount of which will be UAH 4 bln (USD 149 mln). The agricultural producers eligible for the subsidies will include those involved in poultry production and animal farming, as well as fruit and vegetable farmers. 

Out of the total subsidy amount, the poultry producers’ subsidies will be capped at UAH 2 bln (USD 74 mln). For each agricultural producer, the amount of the subsidy is not to exceed the amount of VAT tax paid by the producers, and will be distributed on a monthly basis.

Igor Zholonkivskyi: The idea behind this legislative change was to compensate the losses of agricultural producers from the special value-added tax (VAT) regime’s cancellation in 2017. As we have written earlier, Ukraine’s largest poultry producer MHP (MHPC LI, MHPSA), will likely be the main beneficiary from the portion of subsidies to be allocated to poultry producers. 

In 2015, MHP’s VAT refund amounted to USD 75.4 mln (EBITDA USD 459 mln), and it is going to be completely removed in 2017, based on the agreement with the IMF. Also, Ukraine’s leading egg producer, Avangardco (AVGR LI, AVINPU), had enjoyed a USD 25 mln VAT refund in 2015, so the company will be the second largest candidate for the subsidy. If the poultry producers’ subsidy portion is capped at USD 74 mln,  there might not be enough funds available to compensate the entire VAT amounts to both MHP and Avangardco, and we expect lobbying efforts from the two companies as to how the subsidy funds should be split.