RF Government has postponed for two years the deadline for implementation of investment projects on construction of fishing ships. According to Rosrybolovstvo (Russian Federal Fisheries Agency), 97 are under construction including 58 fishing ships and 39 crab catchers. USC accounts for 43% of those contracts. The fishing market players appreciate the recent measure of support while insisting on more assistance to companies which have a debt load of over RUB 450 billion. IAA PortNews sources in the industry say it is impossible to begin the second phase of the reform amid the current situation.
RF Government has published the Decree on introduction of amendments into the mechanism of allocating quotas for production of aquatic bioresources to allow extension of the construction period from five to seven years, according to the document published on the official Telegram channel of Vice Prime Minister Victoria Abramchnko (Decree N857 dated 12 May 2022 was not available on the official internet portal for legal information at the moment of this article publication).
Thus, the period for implementation of investment projects including registration of property rights for investment objects is extended from 5 to 7 years from the date of signing agreement on allocation of production quotas. Earlier regulations allowed the extension by more than a year but within a six-year period. Now, the limit is set at an eight-year period.
“The Government will help investors facing challenges amid the pressure of sanctions from unfriendly countries escape the risks of cancellation of contracts on investment quotas and proceed with their works”, reads the statement on the official Telegram channel of RF Government. According to the statement, a total of 64 shipbuilding contracts worth about RUB 205 billion have been signed.
Victoria Abramchnko emphasized that his Decree also cancels fines for possible disruption of deadlines.
“We are witnessing alteration of business chains. Time is needed to find new suppliers of equipment and components. That is the case of shipbuilders. In the current situation, the business should be supported and the efforts should be focused on volume preservation and sales redirection”, says Victoria Abramchnko adding that a total of 88 agreements have been signed from 2018 with the scope of investments having exceeded RUB 230 billion. All ships are to be built by Russian shipyards.
Construction of 52 fishing ships and 38 crab catchers was foreseen by the first phase of the programme (according to the data of the Ministry of Industry and Trade as of December 2021). By the end of 2021, the shipyards delivered 6 fishing and 2 crab catching ships.
Neither the Ministry of Industry and Trade nor the Federal Fisheries Agency provided an updated information on the number of agreements.
As Rosrybolovstvo (Russian Federal Fisheries Agency) said in early May, out of 97 ships being currently built in Russia for the domestic fishery industry (58 fishing ships and 39 crab catchers), shipyards of United Shipbuilding Corporation (USC) are building 42 units. IAA PortNews quoted USC as saying that 17 ships have been launched out of 37 units at the phase of construction.
After a period of almost 40 years when Russian shipyards built no fishing ships or crab catchers, the year of 2016 marked the beginning of orders inflow due to transition to the auction based principle of allocating quotas in the fishing industry. The reform foresees that the market players should have their ship built in the Russian Federation to obtain a quota for bioresources. The largest portfolios are those of shipyards in the North-West region – Severnaya Verf, Admiralteiskie Verfi, Vyborg Shipyard and Yantar of United Shipbuilding Corporation as well as Pella shipyard. Far East shipyards also secured some orders. A series of 10 trawlers for Russian Fishery Company is under construction at Admiralteiskie Verfi shipyard, 10 more ships are being built for Norebo Group at Severnaya Verf shipyard.
As industry sources told IAA PortNews earlier, some shipbuilding contracts for construction of fishing ships and crab catchers are at risk due to the sanctions. With import equipment accounting for an essential part in shipbuilding projects, some contracts can be cancelled, according to the agency sources.
“The programme disruption is obvious for everybody. It is not because of sanctions or the changed economic situation. Now, that the conditions have changed drastically, it is no possible to speak about the second phase of the reform,” says Aleksandr Savelyev, Head of the Information Agency for Fishery.
The package of measures developed by VARPE to support the fishery industry included a proposal to extend the deadline for implementation of shipbuilding projects under investment quota programme by two years, says the organization. At the phase of public consultation, VAPRE emphasized the need to approve the required document promptly.
Foreign suppliers’ rejection to deliver equipment that has been ordered and partly paid inevitably entails a long delay and rise in construction costs, says German Zverev, President of All-Russia Association of Fishery Enterprises, Entrepreneurs and Exporters (VARPE). According to VARPE, this measure will prevent loss of investment quotas by companies building new vessels.
“At the same time, a comprehensive approach is needed to protect such investors. The total debt load is estimated at over RUB 450 billion with companies building fishing ships accounting for 50% of it. Throughout the entire delay period the companies will have to fulfill their financial obligations to banks, therefore VARPE suggests reduction of floating credit rates to the level which was before the Bank of Russia key rate was set at 20%, suspension by 31 December 2023 of covenants for investment loans and for repayment of principal debt and interest on loans under shipbuilding contracts implementation of which is suspended due to the pressure of sanctions,” he said.
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