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Friday, September 13, 2013

Government introduces new subsidy program for winegrowers: Interview with minister of agriculture

Photo: Georgia Today
13.09.2013. As the vintage begins in Georgia’s wine-rich Kakheti region, the Minister of Agriculture, Shalva Pipia, promises that this year the government will no longer be a major player on the wine market. Instead, the main focus will be on the industry – the private companies, that will benefit from state subsidies while the farmers will directly receive money from them upon producing the grapes.

Q: How different will this vintage season be to the previous ones?

A: The preparatory work started in the beginning of June and we held meetings with industry representatives. Now we are in a transitional stage, where the whole process should be regulated by the market itself rather than by the state’s interference as was the case under the previous government.

When we talk about comparisons, we should note that the government will no longer be the major player on the wine market anymore. In 2012, two state-based companies entered the market and purchased approximately 60% of the processed harvest for 1 Lari per kilogram. By this action, the government established the price and interfered with the rules of the industry, so consequently, private companies were forced to pay the same amount for their purchase. This time we have introduced a new subsidy program to the industry representatives.

Q: How does the new subsidy program work?

A: Subsidies will not be driven in the form of vouchers, because farmers faced several problems due to a number of procedures. This season, the factories will be the direct subsidiaries. We offered winemakers the promise that if they purchase grapes for 1 Lari or a higher price, they will get the subsidy and in case they purchase them at a lower price, they will not get anything. It should be noted that the purchased product should be of high-quality and fully mature.

In other words, those winemakers who pay higher price, their total cost will be lower than of those who pay for instance, 90 tetri. Therefore, it’s in the winemaker’s interest to pay a price that will give them access to the subsidy. With this new approach the government does not interfere in the relationship between the farmer and winemaker. In addition, the farmer receives money directly from the winemaker and will no longer have to go to the bank several times.

Q: Which grape varieties will the subsidies cover?

A: The subsidy will cover three grape varieties – Rkatsiteli, Saperavi and Kakhuri Mtsvane. Previously, the subsidy did not include Kakhuri Mtsvane and often there were instances when the farmer brought Rkatsiteli, which included some Kakhuri Mtsvane grapes as well. Our vineyards are often mixed and Rkatsiteli and Mtsvane are planted together. Because of this, the problem occurred while submitting as one was covered by the subsidy and not the other. Now, the subsidy will cover all three types and this time the subsidy amount for saperavi will be lower than on the rest.

Q: Will small vine-growers again be given priority in receiving the subsidies?

A: No it will not be like this. As you know, the large vine-growers who had more than 10 hectares of vineyards did not have the opportunity to receive any subsidy. Since there are few large vine-growers in comparison to small vine-growers, the government limited large vine-growers and winemakers by giving subsidies to only small entrepreneurs. This is not the correct approach. Why should we discriminate against those who have 11 hectares? How are they different from the others? So we enabled everyone with high-quality grapes to submit and receive the subsidies.

Q: Can you describe the wine market presently?

A: Currently, we officially have approximately 160 vine-growers and 80 companies across the country. Previously, due to the government’s populist policies, the harvesting started pretty early until the grapes reached their technical maturity, which affected the quality of wine. Our goal is for Georgian vine-growers to steadily sell their products because the quality of the wine is very important, which primarily depends on the quality of the grapes.

In addition, we have created another credit line for wine products. The fifth component was added to our Agro Credit – a loan for the purchase of grapes. With a subsidized loan, the vine-growers will be able to attract 15-month capital with an annual of 6% and therefore receive a preferential resource for turnover capital. A 15-month period was chosen because this is the whole cycle for vine-growers, enabling everyone to purchase the grapes, sell the products and cover the loan.

Q: What are the tools being used to control the quality of wine?

A: We have begun to strictly control the quality of the wine, including laboratory, organoleptic and each entrepreneur’s product control, especially those that are exported. There are few accredited labs that can identify a product’s laboratory control. In addition, there is an Acting Committee which examines the organoleptic characteristics of the wine. Only after all those procedures is the wine exported to foreign markets.

We also have a new system that will give us very precise control over how much and what kind of grapes the industry received. We created software that will register all submitted grapes. Accordingly, we will have a full picture of how much and what kind of grapes were accepted by every player on the market.

Q: When does the vintage season start?

A: There is no exact date for the start of the vintage season, as it dependents on the climate and other various factors. The Kakheti region starts harvesting grapes in late August, in the beginning of September and the first is the Dedoplistskaro district, while the others start from September 15-20. Two weeks ago, we opened a permanent office in the Gurjaani district, where our representatives constantly check the technical maturity of the grapes.

Q: How is the export business developing?

A: This year the demand for a declared process is very high, because the markets opened and increased export potential. The fact that we created a favorable financial channel has stimulated the business and increased the demand.

As for the markets in particular, the Russian market is already open for Georgian wine and spirits, as well as mineral waters. In the last two months, more than 6 million bottles have been exported to the market, which is a very important indicator for the industry. Aside from the Russian market, a significant increase is shown towards other markets. As of today, compared to the same period of 2012, we have seen 43% growth in export.

The top 5 markets for Georgian wine are as follows: Ukraine, Russia, Kazakhstan, Belarus and Poland. We hope that this growth trend will be maintained and we will be able to export higher quality products to foreign markets.

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