Failed Credit Plan Blights Private Farms

More than 10 months after President Boris Yeltsin signed a decree allowing farmers to gain much-needed financing by mortgaging their land, private farms are still suffering for lack of credit, officials and a farm lobbyist said Friday.


"The situation has only gotten worse," said Vladimir Bashmachnikov, president of AKKOR, Russia's largest association of private farms and cooperatives.


"The decree has no real force and has failed to improve the situation for farmers," he added, passing a gloomy look at the wooden model of a prosperous private farm on his windowsill. "Private farms are facing the biggest difficulties yet."


He said in an interview that the failure of the decree, hailed last year as one of Yeltsin's major steps towards reform because it promised to make private land ownership a reality, has kept down the number of private farms to 286,000, only slightly more than in the beginning of this year.


More than 20,000 have gone bankrupt, he said.


Without property to mortgage, private farmers are unable to obtain loans from Russia's fledgling commercial banks, which are already hesitant to hand out loans when legal means to reclaim them are nonexistent, Bashmachnikov said.


Officials at the Agriculture Ministry agreed with Bashmachnikov but blamed the State Duma for failing to pass needed legislation.


"There is still no law on mortgaging," said Gennady Rodionov, deputy head of the private farming department at the ministry.


Rodionov said the State Duma had failed to even present a draft before it recessed for the summer holidays last week.


Along with the decree, the government promised new investment credits, and planned to fund the creation of private food processing plants to break the monopoly of state plants that take supplies exclusively from state farms.


But little has come of those plans and promises, Bashmachnikov said. "The state and collective farm lobby has a strong influence on the government," he said.


Unlike private farms, state farms can use their buildings and equipment as collateral for mortgage loans, Bashmachnikov said.


"Private farmers are disadvantaged," he said, "because they have inferior pieces of land and lack start-up capital."


Rodionov said that in the first half of 1994, the government allotted private farmers 432 billion rubles ($210 million) in loans, which could be obtained through commercial banks at a monthly interest rate of 15 percent.


But Bashmachnikov said that these credits, for purchases of seeds and supplies, require either a mortgage or a 20 to 30 percent cash deposit that few private farmers can make.


Other support plans, pledged by government ministers, have been delayed or blocked by the Finance Ministry and the Central Bank in an attempt to cut budgetary expenditures, he added.


The cabinet on Thursday approved a draft law on private farming, promising equal market access and tax exemptions, but Bashmachnikov took the news with a grain of salt.


"It is a good document, if the Duma does not ruin it," he said.


"But even if there is a law, that does not mean all is well," he said. "It can easily be ignored."


Despite numerous bankruptcies, the number of private farms is still rising slightly because employees of the state and collective farms, also in dire financial straits, are no longer prevented from leaving, Bashmachnikov said. Each member of a state farm has the right to leave with his or her share of the property.


The former state farmers are taking the place of the first wave of private farmers, mostly city people who thought they could make a new career in the countryside, Bashmachnikov said, adding: "City people don't want to go to the countryside anymore. It turned out to be too difficult."