January 27, 2023

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Fertilizer producers will get subsidies. Will the farmer benefit?

The Council of Ministers approved the program “Aid for energy-intensive sectors associated with sudden increases in natural gas and electricity prices in 2022.” About 1,000 companies, especially medium and large companies, are expected to benefit from it. It also means that fertilizer producers will also receive the announced subsidy. But will the farmer benefit from it?

This week, the Cabinet approved the “Aid for Energy-Intensive Sectors Related to Sudden Increases in Natural Gas and Electricity Prices in 2022” program. The program assumptions were approved by the European Commission in December 2022.

This is another stage of government support for energy-intensive companies with a budget of up to PLN 5 billion. The first was the awarding of compensation to 92 entities for the year 2021 of approximately PLN 800 million in 2022, Development and Technology Minister Waldemar Buda reported.

In this way, the Ministry of Development and Technology wants to mitigate the effects of the increase in electricity and gas prices among companies due to Russia’s aggression against Ukraine.

Government support is necessary in those industries most affected by energy prices. Today, some energy-intensive Polish companies are facing problems that could lead to a partial or complete suspension of production. This would cause shortages in raw materials and semi-finished products, and thus disruptions in the supply chain of many products. Interruptions in the supply of essential parts and raw materials stop the production of many commodities needed in daily life. We have already seen this in the epidemic, for example, the disruption of microprocessor supplies from East Asia – adds Minister Waldemar Boda.

As noted in the Ministry of Entrepreneurship and Technology statement, companies operating in energy-intensive industries are often a significant employer in the local labor market. They employ up to several thousand employees in one factory. In some cities, industrial facilities provide a heating system for local communities. The current situation in the energy market may pose a threat to thousands of jobs, as well as the possibility of providing heating to residents of apartment complexes.

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European Commission approval

The program was developed on the basis of the Law of September 29, 2022 on the rules for implementing programs to support entrepreneurs in relation to the situation on the energy market in 2022-2024.

In terms of compliance with EU legislation, it is based on data published in October this year. by the European Commission for the “Temporary Crisis Framework for State Assistance Measures to Support the Economy After Russia’s Aggression Against Ukraine”.

The European Commission informed the program on December 20, 2022, confirming its compliance with the EU State Aid Act.

Whose help?

It is estimated that the group of industries that will benefit from the aid consume more than 20 terawatt hours of electricity annually, which represents more than a third of the consumption of all industrial companies. These are industries such as: metallurgy, ceramics, cement production or fertilizer.

Entrepreneurs operating in Poland who fulfill two common conditions will be eligible for the programme:

  • The costs of purchasing electricity and natural gas accounted for no less than 3% of the value of their production in 2021 or 6% of the value of production in the first half of 2022.
  • At least half of its revenues or the value of its production came from activities contained in the Public Key Directory tokens or PRODCOM tokens included in the list of sectors particularly vulnerable to the impacts of the crisis, developed by the European Commission.

financial aid

The program budget is over PLN 5 billion.

The amount of the subsidy depends on the amount of eligible costs incurred by the entrepreneur from February to December 2022. These are gas and energy purchase costs resulting from a price increase of more than 50% compared to the average price in 2021.

There will be two maximums of assistance depending on the financial situation of the entrepreneur. The basic limit is 50% of eligible costs, up to a maximum of €4 million per capital pool. Entrepreneurs who register a decrease in EBITDA (a measure of enterprise profitability) by at least 40% between the full year 2021 and 2022 or between the second half of 2021 and the second half of 2022 will be eligible to increase the assistance limit. The increased limit will also apply to those companies that posted negative EBITDA in both periods. The amount of support in the increased limit may be up to 80% of eligible costs up to 50 million euros per capital pool.

Call for proposals

The program operator will be the National Fund for Environmental Protection and Water Management.

The call for applications should be launched by mid-January. Entrepreneurs will have 14 days to submit applications from the date of publication by the Ministry of Development and Technology and the program operator of information about the possibility of applications.

The money must be paid in February of this year.

Will the farmer benefit?

When the European Commission announced in September that it was opening the way to support EU energy-intensive enterprises (including fertilizer producers), both Janusz Wojciechowski, the EU Commissioner for Agriculture, and Henrik Kowalczyk, Deputy Prime Minister and Minister of Agriculture, predicted that this would mean a direct decline in fertilizer prices in the near future.

How it will really be, only time will tell.

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