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Spain allocates 660 million euros in direct aid to compensate farmers, ranchers and fishermen

Christian Fernsby |
The Government will allocate direct aid for 660 million euros so that farmers, ranchers and fishermen can face the increase in energy prices, as a result of the Russian war in Ukraine, which have caused higher production costs due to the increase in fertilizer prices and agricultural and fishing diesel.

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These measures are included in the framework of the royal decree-law on measures to tackle the economic and social consequences of the war in Ukraine and to support the reconstruction of the island of La Palma and other situations of vulnerability, which also includes reference to a temporary reduction in VAT on certain foods.

Fertilizers

In the case of fertilizers, some 300,000 farmers will benefit from direct aid, with a budget of 300 million euros. This subsidy will be granted per hectare, up to a maximum of 300, and will be 22 euros per hectare in the case of dry land and 55 euros for irrigated land.

Fertilizers account for 8% of the intermediate consumption of the agricultural sector and their average price increased by 80% between September 2021 and September 2022. For this reason, the Government considers it necessary to enable aid to face this increase in costs and that affect the profitability of agricultural enterprises.

Agricultural and fishing fuels

Farmers, ranchers and fishermen will continue to count on the help of 20 euro cents per liter of diesel. The high price of this fuel has affected the profitability of farms and fishermen.

The aid will be granted to those farmers who exercise the right to refund the installments of the Special Tax on Hydrocarbons (IEH) paid or supported on the occasion of the acquisition of agricultural diesel.

The subsidy will be 20 cents per liter of diesel consumed and the consumption intended exclusively for agricultural use carried out in 2022 will be taken as a reference, as it is the last year with closed data.

The amount of the subsidy will be paid by the State Tax Administration Agency, by the same procedure through which the partial refund of the Special Hydrocarbons Tax is made. Aid will be considered requested with the presentation of the request for refund of the Tax on Hydrocarbons for the diesel used in agriculture and livestock, in accordance with the provisions of Order EHA/993/2010, of April 21 as of April 1. April 2023.

Some 120,000 farmers and ranchers request this return each year, although it is expected that the number that will finally benefit from this aid, calculated at 240 million euros, will be higher. The return can be requested from April 1, 2023.

In the case of the fishing sector, the Ministry of Agriculture, Fisheries and Food, with a budget of 120 million euros, will grant direct aid based on the estimated diesel consumption of the vessel to cover the additional costs derived from the increase in the fuel costs of each fishing company.

The estimation is made based on data on diesel consumption of the fishing fleet from the latest Economic Survey of Maritime Fishing. The ministry estimates that a total of 8,900 fishing vessels will benefit from this measure. The cost of fuel represents around 30% of production costs in this sector.

On the other hand, the sector also benefits, for another six months, from the exemption from fishing fees, which will mean savings of around 500,000 euros for the sector

VAT reduction on certain staple foods

Regarding the Value Added Tax (VAT) of certain foods, temporarily, from January 1, 2023 and until June 30, 2023, the Ministry of Finance and Public Function establishes certain reductions.

Thus, the following foods go from 4 to 0% VAT: common bread, as well as frozen common bread dough and frozen common bread intended exclusively for making common bread; bread-making flours; the following types of milk produced by any animal species: natural, certified, pasteurized, concentrated, skimmed, sterilized, UHT, evaporated, and powdered; the cheeses; the eggs; as well as fruits, vegetables, legumes, tubers and cereals, which have the status of natural or fresh products.

In addition, the 5% VAT rate will be applied (currently it is at 10%) to olive and seed oils, and to pasta.

This reduction in the tax rate will fully benefit the consumer. This means that the amount of the reduction cannot be totally or partially used to increase the business profit margin. The affected sectors may, due to social responsibility, assume other additional commitments that result in a decrease in the prices of the shopping basket.

Other measures

The measures adopted, both in the previous regulations and in the current one, will have a medium-term effect on the cushioning of the final prices of food for consumers. Although food inflation in Spain is below the community average, the rise in the prices of the shopping basket is affecting some families, especially those with less purchasing power.

Therefore, the Government will grant aid of 200 euros for more than 4.2 million families with incomes of up to 27,000 euros to offset the rise in food prices.


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