Банкеръ Weekly

Briefs

THE PROBLEMS OF A DAIRY BOARD IN BULGARIA

The establishment of a national dairy board and the introduction of measures for allocating individual milk production quotas among the farmers are among the pressing requirements of Brussels towards Bulgaria's agriculture. Since the amendments to the Stock-Breeding Act became valid on April 6, 2004, the necessary legal framework is already existing. Yet the most difficult task is still to be done - to determine the rules of work and structure the organisation on a national and regional level.
According to the same act, the National Dairy Board is a society of milk and dairy products manufacturers, processors and traders. The body should provide protection and control over the origin, quality and authenticity of the products made and sold. The organisation is expected to help for the establishment of a scheme that will guarantee that nobody is hurt in the sector. After the National Dairy Board was created, regional structures were also opened in Sliven, Dobrich, Pleven and Plovdiv. There are still four others to be established - in Rousse, Blagoevgrad, Vratsa and Kurdzhali. The board activity will be financed through goal subsidies from the Agriculture state fund, through consulting revenues, donations, funds from international financial institutions as well as its own membership fees. Its management structure will include a general assembly, an 11-member managing board and a five-member controlling council involving representatives of the ministries of agriculture, finance, economy, and healthcare, as well as branch organisations and scientific institutions. Dimitar Zorov, head of the Association of Milk Processors in Bulgaria, was chosen to preside the managing board. Plamen Penchev was appointed his deputy. Atanas Kiskinov was the person authorized to preside the central council.
Milk will be purchased at a recommended base price controlled by the board. According to Mr. Kiskinov, the price will be calculated on the basis of the average cost price plus the profit of the producers. Each farmer will be allowed to increase it with bonuses for better quality.
Control over the quality of milk
and dairy products will be among the board's most important functions. Three independent laboratories are currently under construction in the country in order to describe the quality of the products. They will take samples from the purchase stations, carry out analyses and issue certificates on the basis of which the raw material will be paid. A term expiring on April 30, 2009 has been settled with the European Commission during which the 2% butter content milk will be offered on the domestic market as half-skimmed milk and the 3% butter content one - as unskimmed milk.
Dairy farms will analyse the purchased milk every day. They will be responsible for the quality of both the raw materials and the dairy products. In turn, the state vet and sanitary control body will monitor the work of both the independent laboratories and the processors, the Executive Director of the Association of Milk Processors Mihail Velkov explained. In case of anomalies, the board will give warnings so that the state could restore the market equilibrium.
The allocation of the quotas
will be the most important task of the society. It will monitor their fulfilment and transfer. The implementation of the country's quota as a whole will be monitored by Brussels. The dairy quotas system has been existing in the European Union since 1984 and was introduced to impede the extreme production of milk and dairy products. Every farmer has a licence to produce a certain amount and if he exceeds it, he is to be sanctioned unless he has profited by the chance to hire or buy individual quotas. The size of the milk quota with which Bulgaria will enter the community was among the key moments in the negotiations on the Agriculture chapter. The requested quota was 2.1 million tons, even though the milk purchased in the past years in Bulgaria was 1.3 million tons a year. Eventually, the country was given the modest 979,000 tons which are still an achievement, considering the ridiculous inertness of the Bulgarian negotiators.
Along with the other functions, the board will also make proposals for milk subsidies from the European funds. It will assess the necessity of intervention on the market for the maintenance of constant prices, make a strategy for development of the milk sector, write an annual report on its condition, and present a register of dairy products with protected origin name. All this, however, is still to happen. For the present, the establishment of the organisation is being accompanied by numerous problems. Once the National Dairy Board was established
scandals about the regional structures exploded
In practice, they were meant to guarantee decentralisation and report the specificity of every region, but their creation evolved into a real battle for leadership among producers, processors and traders. Milk producers reproach processors that since they owe them money for the raw material, they will hardly be able to defend their financial interests in the board. In turn, processors are dissatisfied with the proposals of the management of the national board for managers of the regional structures. According to Petko Hadzhiiski, owner of a milk processing firm, this is not going to happen in Vratsa - quotas cannot be determined by people pointed by the management. His opinion is shared by Ivan Petrov, owner of Mlechen Ray, and Bocho Petrov, manager of Lactis. Each of them operates with at least 50 or 60 farmers who produce milk.
Undoubtedly, tension will grow much higher when individual milk permissions are to be allocated. In the European Union, if a national quota is exceeded the sanction is imposed on the state which in turn punishes the respective farmer. But a nongovernment organisation such as the National Dairy Board may only take part in the setting of the rules and not in the allocation of licences and the punishment process, experts claim. You cannot require a nongovernmental sector, they say, and try to administer it at the same time. Another stupidity is the turned pyramid, they say, which means that a national board was established first and the regional structures after it.
There are also irreconcilable contradictions between producers and traders. The first group complains that dealers reduce the milk purchase price so much that in fact the subsidy given for every litre from the Agriculture fund goes in their pocket. It has already become a rule that 80% of the members of the management of the national and the regional structures should be dairy products traders.
The Association of Agricultural Producers comments that
the conflict of interests
lies back in the idea for unification of the branch organisations of producers, processors and traders, among which there have always been contradictions about the purchase price and the distribution of the quotas. Besides, the regional boards are independent legal entities and according to the Legal Entities Act they must be totally independent from the National Dairy Board. However, it has taken up regulating functions which contradicts the same normative act. Foretasting the future disputes, many of the big producers and processors refuse to take part in the management of the organisation.
Producers claim that it is not the board but the market that should determine the base purchase price of the milk which varies in the different regions of the country. They fear that if things go on the same way, the corruption mechanisms will transfer from the administration to the nongovernmental organisation. Why its statute requires that officials take part in it remains a mystery.

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