Loading

On 5 September 2014, the Government of Georgia approved the substandard apple[1] subsidy project. The Minister of Agriculture made the following statement about this fact:  “The approach is the same as in the case of the grape harvest. If a company purchases substandard apples for 10 tetri, it will get an 8 tetri

subsidy from the state. This will change the picture that has existed over the past years. This is unprecedented. Nothing like this has happened before.”

FactCheck

took interest in the statement and verified its accuracy.

According to the Resolution of the Government of Georgia, in the case of purchasing 1 kilogram of substandard apples for not less than 10 tetri, processing factories will receive 8 tetri

as a subsidy. In order to provide for an organised delivery of substandard apples, a headquarter office was opened in Gori on 10 September on the initiative of the Ministry of Agriculture and the Agricultural Projects Management Agency. At this stage, five processing factories are purchasing substandard apples:  LTD Samegobro, LTD Biojuice, LTD Natural 7, LTD Geofruit and LTD Geoconcentrate.

The budget for the substandard apple sales promotion project amounts to GEL 3,000,000. This amount will be received from the assignations of the Preferential Agro Credits

Sub Programme in the 2014 budget and will be directed to the account of the Agricultural Projects Management Agency. As of September, farmers have already delivered more than 5,000 tons of substandard apples.

The market price for substandard apples in 2013 amounted to 7-10 tetri whilst in 2014 the price dropped to the record of 2 tetri. In an interview with TV Dia, the Director of LTD Samegobro, Davit Saganelidze, stated that the sharp decline in the price is caused by stopping the export of apples from the EU to Russia because of the sanctions imposed upon the Russian Federation by the European Union in response to the Ukraine crisis. The closing of the Russian market caused an abundance of apples in Poland and Moldova which ultimately caused the sharp decrease in the price of apples. Therefore, the export price of apple concentrate also decreased and so for these reasons Georgian factories do not wish to pay more than a mere 2 tetri for substandard apples.

As noted above, this year the price for substandard apples (without the subsidy) was the lowest as compared to the last years’ prices. This fact created the need for the subsidy.

image001

With the Government’s subsidy, this year’s price more or less equated that of the previous years’ average market price, avoiding spoilage of almost 100% of the harvest.

It is noteworthy that the need for the subsidy has been present almost every year. Collecting and transporting substandard apples costs an average of 5-10 tetri

per kilogram and so this creates a group of farmers for whom delivering their apples to the factories for a low price becomes unprofitable and this has existed every year. Naturally, such a group exists under the condition of the subsidy, too. Delivering the apples from other regions to Shida Kartli is more costly which creates a loss for the farmer. More or less perceptible is the profit for those farmers whose apple fields are located close to the Gori Municipality and who harvested relatively more apples as compared to others. Therefore, this year’s subsidisation does not change the picture that has existed until today as the group of farmers for whom delivering substandard apples was unprofitable remains, in fact, the same.

It should be noted that the subsidisation and promotion of the substandard apple harvest is an unprecedented event for Georgia. This is certified by the letter we received from the Ministry of Agriculture.

Conclusion In the case of purchasing 1 kilogram of substandard apples for not less than 10 tetri, factories are receiving 8 tetri

as a subsidy.

Neither the subsidisation of the industrial apple nor its sales promotion has had a precedent before and so the Minister is correct in this part of the statement. This said, however, the subsidisation does not change the overall picture that has existed throughout the years because with this step only this year’s record low price was more or less equated to the previous years’ prices. As a result, the picture remains unchanged – the price is acceptable only for a certain group of farmers whilst the profit is mere, at best, for almost everyone.

FactCheck concludes that Otar Danelia’s statement is HALF TRUE.


[1]

Substandard (industrial) apples are those apples which fall from the trees because of wind, hail or some other meteorological phenomena. Mostly, substandard apples are unsuitable for eating and being cheaper than standard apples, they are used by factories for preparing an apple concentrate.