The European Commission has approved more aid programs for farmers. The first of these, worth approx. 1 billion, aims to support liquidity for agricultural producers in the wake of the war in Ukraine. The second is a €1.3 billion program to support agricultural producers in paying premiums for insurance against adverse climatic events. The EC also recently approved a support program for wheat producers (see a previous issue of Water Issues for more information).

Aid programs – liquidity support for agricultural producers in connection with the war in Ukraine

Within the framework of this type of support – assistance programs, it is envisaged to pay cash assistance in the form of direct grants. The assistance programs are designed for agricultural producers who are facing financial problems due to the rising cost of mineral fertilizers and the instability in the agricultural market caused by the ongoing crisis.

The program was approved under the Interim Framework for State Aid in Emergencies and Transition. The commission adopted it on March 9, 2023. to support activities in sectors that are key to accelerating the green transition and reducing dependence on fossil fuels.

Aid program – support for agricultural producers in the payment of premiums for insurance against the effects of adverse climatic events

The purpose of the program is to help agricultural producers pay insurance premiums for certain crops and livestock species against damage that may result from certain adverse climatic events, such as hurricanes, floods, landslides and avalanches. The level of insurance premium subsidies for eligible beneficiaries is up to 65% of their amount. The assistance program will run until December 31, 2027.

The aid program is aimed at small, medium and large enterprises engaged in primary agricultural production in Poland, and which take out insurance with insurance companies designated by the Polish authorities through an open tender.

In addition, it provides for a national drought reinsurance mechanism, under which the state will cover part of the compensation costs that insurance companies would have to pay to agricultural producers.

The scheme was assessed by the EC on the basis of EU state aid rules, in particular Art. 107 paragraph. 3(c). Treaty on the Functioning of the European Union (“TFEU”) and the 2023 Guidelines for State Aid in the Agricultural and Forestry Sectors and Rural Areas.

The Commission said that the planned assistance program:

  • contributes to maintaining stable incomes for agricultural producers and thus to the overall goals of the Common Agricultural Policy of promoting a smart, competitive, resilient and diversified agricultural sector and ensuring long-term food security;
  • is necessary and appropriate to address the market failure of high prices for insurance policies that agricultural producers would not be willing to purchase without subsidies covering part of the premium. In addition, a national drought reinsurance mechanism is necessary because without it, insurers would not be willing to offer drought insurance;
  • is proportionate because it is limited to the minimum necessary to achieve the goal. Moreover, its positive effects outweigh any potential distortion of competition and trade in the EU.

Crop and livestock insurance with premium subsidies from the state budget in 2023.

Farmers who have signed an insurance contract for crop and livestock production in 2023 can count on subsidies from the state budget. The level of insurance premium subsidies for signing an insurance contract has been set at:

  • 65% of the premium up to 1 hectare of agricultural crops;
  • 65% premium up to 1 pc. livestock.

Cases in which compensation will be paid:

  • Mandatory subsidized insurance contracts for field crops, vegetables and fruits cover the following fortuitous events: hail, spring frost, adverse winter effects, flood, drought;
  • Voluntary subsidized insurance contracts for field crops, vegetables and fruits cover the following fortuitous events: hurricane, driving rain, lightning, landslide, avalanche;
  • Voluntary subsidized livestock production insurance covers the following contingencies: hurricane, flood, driving rain, hail, lightning, landslide, avalanche, emergency slaughter.

In addition, it is worth noting that if you receive direct subsidies, by law you must insure at least half of the area of subsidized crops against at least one mandatory risk: hail, spring frost, negative winter effects, flood or drought. A farmer who fails to fulfill the obligation to conclude a mandatory insurance contract, i.e. at least 50% of the crop area, may be penalized and required to pay a mandatory fee.

Detailed information on crop and livestock insurance with a premium subsidy from the state budget in 2023. can be found on the website of the Ministry of Agriculture and Rural Development.

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