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We will open at the earliest the measures for modernization of farms and young farmers, says Rumen Porozhanov, Executive Director of State Fund ‘Agriculture’

BOX: Rumen Porozhanov resumes his position as a Head of State Fund ‘Agriculture’. What he has found in the Paying Agency and when the new Euro funds will go to the agro business and the villages, explains Mr. Porozhanov in his first interview given since occupying the new position.  

- Mr. Porozhanov, what have you found in State Fund ‘Agriculture’ upon your returning?

- The Fund is one of the hardest and most complicated administrative structures in the country, since it has been managing two big European agricultural funds, certifies the expenditures for the fishing program and manages the about 300 million BGN for national payments and state aid. What is now happening in the Fund is connected mainly with the management and payment under the Rural Development Program up to the end of the year so that all submitted applications that meet the requirements to be approved and paid. Moreover, there is apparently a possibility that we cannot put all the funds to use under the Rural Development Program (RDP) this year.

- Why we won’t be able to put all the funds in use and what is their exact amount?

- The main problems that are being encountered while putting the budget into use under the Rural Development program are two. Firstly – the microeconomic environment which is not favorable to the business as a whole. The companies experience difficulties in providing the financial resource in order to implement their project and to ensure added value, which they can benefit from. It is the reduced consumption in the country that creates problems for those of our beneficiaries who rely mainly on selling or offering services in the domestic market. Those who manage to make export-oriented production have their better perspectives. Secondly, this is the provision of financing for the realization of the projects in advance.

- Has the problem with the Corporate Commercial Bank had any impact on the funds absorption? 

- A problem with a big systemic bank of such kind always affects the whole economy. A big sector, such as agriculture, is not an exception. There were blocked funds in the Corporate Commercial Bank and also funds of municipalities with projects the Rural Development Program and private beneficiaries. The problem with the bank itself created additional greater restriction in the relationships between bank customers and financial institutions in the provision of loans. A problem for the funds absorption this year is also the operation of the administration itself and particularly the management decisions in the fund from the end of last year until the end of July this year. Elementary procedures for annexes are rather slow, as well as those for public procurement of three, six and more months. It cannot be avoided that all these affect the overall delay of the funds absorption under the program. As for the possibility of losing funds, the initial forecasts were for over 100 million Euros. I think will go further below that amount, but I do not want to announce an exact number, but we will reduce the loss by about 25-30%. We do everything to settle as quickly as possible the eligible projects – in compliance with all rules, in order to lose the least possible resources. I would also like to mention the other important payments which the Fund is administrating in December. In the past two weeks 12 schemes notified to support the livestock sector were paid nearly 130 million BGN, half of them from the European guarantee fund. We also paid more than 71 million BGN, only for the last week, on projects under the Rural Development Program. During the current week we expect to make a lot of payments related to agro ecology, disadvantaged areas and Natura 2000. These payments will exceed 350 million BGN and may reach an amount even higher than that. Namely these funds, which are along the second axis of the Rural Development Program, will be one of the main factors for the budget set for the year to be absorbed. 

- The Minister of agriculture Desislava Taneva announced that Brussles wants to impose corrections on our country. How much money will we have to pay back?

- Apart from the non-utilization of the budget according to a number of audits carried out throughout the period of implementation, the European Commission proposes various sanctions. They are mostly connected with the municipality measures and mainly the holding of public procurement and the control over them. Every year there are sanctions due to the direct payments but with each year these sanctions reduce. What the Minister announced was a correction of 60 million Euros. However, the big problem is the legislation in our country creates conditions for the imposition of corrections. The most striking one is the case with the Public procurement Act although it has been agreed with the European Commission. The auditors have established a number of vices which, according to them, harm the European budget. It is these vices or practices in order to be avoided should find their place in the law as well as in the regulations for approval of public procurement.

- What exactly are these vices?

- The main ones are the criteria for evaluation, especially when it comes to the technical parameters in the offer with the criterion of the most economically advantageous price. These criteria should be objective so that each applicant can calculate exactly how many points they would gain under these criteria. In no case should the price be less than 50% of the evaluation. Namely subjectivity, which could be necessary for the evaluations, currently creates prerequisites for alleged violations of procedures. We must learn a very clear lesson and for the current programming period which has already started, the arrangements to be made in a way to minimize to the greatest extent such practices. The functions of the control bodies should be very clearly identified in the Bulgarian legislation, in particular the State Fund "Agriculture". Their recommendations have to be easily applicable and compulsory.

- What point have we reached with the preparation of the new RDP and with the new rules for direct payments?

- Upon a proposal of the Member States in 2014 was transitional also in terms of the first pillar (direct payments) and the method of payment from the previous period was applied.  This year should have been used to adapt the paying agencies, legislation, information and mapping arrays for ordering of payments. What happened here is hard to comment. Almost nothing happened during the first six months and after that the task forces started a partial preparation. The very adapting of the legislation started just at the end of the current year. We have started a new business communication between the new management of the Fund and the Ministry of Agriculture so that we can adapt the first pillar of applications to start in March. However, this is far more difficult compared to the system which has been applied so far. In the new program period the direct payments are over 40%, the green payments should be at least 30% and we also have funding for disadvantaged regions. There are also subsidiaries bound with the budget that will be about 13% of the budget. The distribution payment that Bulgaria will implement should also be adapted – it is an additional payment for those who cultivated up to 300 hectares. Another significant requirement is that each Member State works out a mechanism for control in the application of the ceiling of payments. This aims at avoiding the artificial partitioning of the land so that that money is received by just one beneficiary but through mere companies. The failure to do so will automatically lead to the relevant sanctions for the country.

- Has there been a similar fragmentation yet?

- I do not preclude it and therefore there has to be a legal framework disregarding those cases. Of course, the issue of the new RDP is not less important. It is no secret to anyone that Bulgaria again was the last country that submitted the program at the last possible moment and over 480 comments have been returned with regard to it, many of them were quite substantial. The colleagues from the Ministry of agriculture and the Fund are in continuous communication with the European Commission. Each comment is being specified and settled in conference calls.

- What is the most optimistic variant - when could the first measures of the new program be opened?

- The vision is not to wait for the approval of the program for the opening of the first measures. Most likely the first measure to be opened will be 4.1 - investments in agricultural holdings - at the end of the first quarter.

Support will be aimed at the modernization of farms, including those in sensitive sectors with difficult access to the market and the organic production. Possibly in the second quarter will the following measures will be opened consecutively 2.1 - advisory services for farmers and foresters, and 6.1 - initial aid for young farmers. They respectively correspond to the present measures 143 and 112. The support and services under these measures will be focused entirely on young farmers - under the age of 40 years of age.

- You are the first person who occupies the post of a Head of the Fund twice. What are differences between your previous mandate and the present one?

- Unfortunately it is far more difficult than it was before. The closure of the old program period piles along with a lot of payments and audits. We cannot fail to note what happens – the State Fund ‘Agriculture’ does not have a certifying body for the financial 2013 – 2014. It is two days now since the since the selected certifying body took its place in the Fund. It is of great importance also that a new procedure is started for the selection of a certifying body for the next period. Combining all this with the many open questions regarding the new programming period create a complicated situation. Therefore the good team work with the Ministry of Agriculture, with the other administrative structure, with the associations and the sector as a whole is of great significance so that there is a consensus on what is being done.