Energy menu of subsidies being chosen for industrial parks

Electroshock therapy

To overcome the investment downturn in the context of the pandemic, the government of Tatarstan is ready to take unprecedented steps to support the residents of industrial parks. Small and medium-sized businesses can get not only a standard package of tax benefits, but also cheap electricity. In search of effective measures, the ministry of economy of the republic has gone beyond direct tax incentives and proposed to give, as one of the sources put it, “strong antidepressants” — to subsidise the cost of electricity consumed in the production of products in industrial parks of Tatarstan, through a compensation mechanism.

Moreover, energy subsidies in monetary terms may be even more significant than the republican tax preferences, according to the developers of the updated concept of improving the efficiency of industrial parks. So far, such extraordinary techniques for reviving activity in industrial parks have not been used in any of the Russian regions.

The main points of the new concept for the development of industrial parks were first outlined by Minister of Economy of Tatarstan Midkhat Shagiakhmetov at the reporting board meeting, which was held with a wide representation of invited guests from federal authorities. In short, the essence was as follows:

“It is planned to offer tax breaks and subsidies for the cost of electricity for the residents of the parks in return for fulfillment of the obligations for investment and jobs," the minister of economy of Tatarstan presented the recipe for improvement the parks.

Before that, he reminded that industrial parks were created in almost every district of Tatarstan. There are 100 infrastructure facilities in total: 80 parks and 20 sites. 1,515 residents were located in their premises, 32,000 jobs were created, Shagiakhmetov reported, avoiding the disclosure of consolidated revenue. However, later the head of the ministry of economy admitted that not every park is 100% loaded, and after the pandemic, the chances of filling them completely fell.

At development stage so far

According to the plan of the ministry of economy of the Republic of Tatarstan, the energy “stimulators” should turn industrial parks into “real points of economic growth for SMEs and the municipality itself”. Midkhat Shagiakhmetov added that the concept was approved by the president of Tatarstan, and his department has prepared a legislative initiative aimed at providing republican tax benefits for residents of industrial parks.

The minister called on the deputies of the State Council of the Republic of Tatarstan to take an active part in the elaboration and adoption of the draft bill. However, he decided not to specify through which republican bill the tax benefits for residents will be implemented. If the legislative initiative is ready, when will it be brought before the State Council? And most importantly — are energy subsidies backed up by budgetary sources?

First Deputy Minister of Economy of the Republic of Tatarstan Rustem Sibgatullin, who oversees the sphere of small businesses, refrained from giving comments to Realnoe Vremya on this topic, referring to internal regulations in communication with the media. The press service of the ministry of economy explained that the concept was prepared throughout 2020 and “is still at the development stage”.

Khimgrad, Investment Development Agency, and Investment and Venture Fund

As it became known to Realnoe Vremya, the approaches in the development of this concept was represented by two groups — the managing company of Khimgrad Technopark, operating on the market since the mid 2000s, and the team of the Investment and Venture Fund of the Republic of Tatarstan. A separate opinion was expressed by the Investment Development Agency of the Republic of Tatarstan.

It couldn't be found out from whom the idea to introduce a mechanism for subsidising energy costs to residents of industrial parks came. But it should be recognised that the problem of energy tariffs is long overdue for SMEs. For entrepreneurs, 1 kWh is much more expensive than for industrial consumers, who purchase power at a high voltage level.
SMEs have repeatedly raised the issue of reducing the tariff difference between consumers of high and medium voltage levels. Moreover, the tariffs in Laishevo could be very different from the energy tariffs in Agryz. But each time the issue was “postponed”. Apparently, this time there was nowhere to retreat — electricity tariffs have reached a maximum in the last 5 years, Kommersant has recently reported. Moreover, industry analysts predict an increase in final electricity prices in 2021 by another 5,5%.

“We really took part in the discussion of the documents that are being prepared. Our task was to solve the issues of improving the efficiency of existing sites and newly created ones," said Ayrat Gizzatullin, the director general of Khimgrad JSC, to Realnoe Vremya.

According to him, tax incentives are supposed to be provided to two categories of parks: those operating with a low load and those newly created in the areas bordering with Kazan within the Kazan agglomeration. The bottom line is to avoid the pendulous migration and encourage job creation near new housing developments.

The weaker the area, the lower the electricity tariffs should be

The idea of subsidising energy costs is to encourage businesses to locate production facilities on the territory of the industrial park. However, the question remains open — to unify preferential tariffs for residents of all industrial parks or to differentiate them depending on the socio-economic situation of the district. According to Gizzatullin, it would be reasonable to “link” the tariff to the level of the socio-economic situation of the district. The weaker it is, the lower the electricity tariffs for the residents of the industrial park should be.

“This will allow us to bring businesses there, which, all other things being equal, are not going there yet," said the head of Khimgrad.

“Every time one director then another asks to reduce the electricity tariff for residents of industrial parks, but it is impossible without," said the representative of the executive committee of Aznakaevo.

According to him, there are four industrial sites and one industrial park in the district, which has recently increased the territory to 4 hectares to have the opportunity to participate in federal support programmes.

“Our municipality has been one of the first in Tatarstan to provide benefits — rent and land tax were reset to zero. We gave everything that could be given at the municipal level. But the park is 50% loaded," he said.

The source sees the reason in that Aznakaevo is located away from federal highways and away from the railway: “Unfortunately, we can't attract more residents," he explained, adding that low electricity tariffs would help solve the problem.

“The principle works here — the more you consume, the less you pay”

Meanwhile, energy companies are not ready to reduce tariffs at the average voltage level.

“The main part of consumers in the republic receives electricity at a high voltage level. They account for 60,5 per cent of the total consumption. Moreover, the number of such consumers is growing every year. And electricity at low voltage is a technologically more complex process. The transformation from a high to a low voltage level requires additional costs, as there are losses, downflows," the Tatarstan energy company explained. “To reduce the tariff gap, it is necessary to increase the volume of consumption by consumers at a low voltage level. Or to increase the amount of cross-subsidisation. The principle works here — the more you consume, the less you pay.”

Today, according to experts, grid companies bear the entire burden of the decisions taken in recent years in terms of benefits for the population and businesses for technical connection, in addition, they have to live in conditions of restraining the growth of tariffs: “It should be noted that the methodology, within which the tariffs for electric power transmission services with their differentiation by voltage levels is calculated, and strict state control over changes in the amount of cross-subsidisation, currently do not allow to reduce the difference between tariffs for voltage consumers of different groups.”

Letter of leaders to the president of the republic

Two years ago, the heads of two districts submitted a letter to the president of Tatarstan with a proposal to extend tax benefits for industrial parks.

“To date, external investors have almost ceased to consider other territories of the republic, except for the PSEDA and two special economic zones (SEZs), as objects of investment in production, processing and logistics," they noted. “This leads to the degradation of the economy of most of the rural settlements of Tatarstan, and in the areas of direct influence — PSEDA and SEZ — and to the additional expulsion of the entire economically active population from rural areas.”

Then the heads of municipalities proposed to include them in the boundaries of the existing PSEDA. At the same time, the president of the republic instructed the government to study the possibilities of implementing this initiative. However, any entry into the PSEDA turned out to be impossible, as the federal authorities imposed a ban on it.

At the same time, the ministry of economy of the republic did not give up on this idea. Already then, the possibility of creating “special economic zones” at the regional level with the provision of eight tax benefits was being studied. Among them, there are the republican part of the income tax, property tax, transport and land taxes. But the idea of energy subsidies did not sound then.

The ministry of finance of Tatarstan confirmed to Realnoe Vremya that at the first stage they discussed the creation of special economic zones at the regional level, but then abandoned this scheme. The problem is that it is necessary to support such support measures with budget sources within 1 billion rubles. Otherwise, there is no point in doing this.

Investment Developemnt Agency: the bill will be presented by the end of the year

“We at the Investment Development Agency of the republic, on my initiative, created an interdepartmental working group and conducted an analysis of the effectiveness of industrial parks in Tatarstan. Last November, at a meeting of the Committee of the State Council of the Republic of Tatarstan on Economy, Investment and Entrepreneurship, some part of this analysis and conclusions were presented, as well as proposals for improving the efficiency of activities. As a result of the meeting, the economic block of Tatarstan specialists developed a proposal on the regime of regional special economic zones.”

This proposal was supported by the Prime Minister of Tatarstan Aleksey Pesoshin and the president of the republic. Rustam Minnikhanov instructed to develop an appropriate draft bill, one of the co-contractors is the Investment Developement Agency. The work in this area is underway. I believe that such bill will be submitted jointly by the end of the year. In parallel, work is underway to transfer direct supervision of part of the industrial parks to the Tatarstan Investment Development Agency in order to ensure the occupancy rate and the control of management companies. We are currently working with the minister of economy to determine the list of such sites," Taliya Minullina, the head of the Investment Development Agency of the Republic of Tatarstan, told Realnoe Vremya.

The draft bill on tax incentives for industrial park residents has not been submitted to the State Council of the Republic of Tatarstan, but it is expected. According to Marat Galeev, a member of the parliamentary Committee on Economy, Investment and Entrepreneurship, it will help give a new impetus to the development of the territories.