State Aid - an Element of the State Policy for Enhancing Competitiveness of the Bulgarian Agriculture 2007-2013

V. UZUNOVA

Abstract: State aid and direct area payments compensate the significantly lower profitability of agriculture compared to other sectors of economic activity. The main result they produce is ensuring food sovereignty and avoiding bankruptcies and large-scale withdrawals of farmers from agricultural activity. In addition, the funds for direct support are used to finance production costs and investments in farms. This function of the direct payments is particularly important to the Bulgarian farmers due to their limited access to financial resources. Direct payments in Bulgaria are distributed through the Single Area Payment Scheme (SAPS) and are provided from the EU budget. The European legislation allows for certain flexibility of the Member State to allocate up to 3.5% of the direct payment ceiling and make it available in the form of specific support for certain areas which are economically vulnerable and/or sensitive in terms of environmental conditions. The article reviews the amount and dynamics of direct payments in agriculture following our accession to the European Union. A special consideration is given to the support schemes through the national top-up payments for the period 2007-2010 as well as their forecasted amountuntil 2013. An emphasis is placed on the fact that state aid and national top-up payments provide steady income for farmers and increased productivity not so much due to the increased area of the agricultural land but rather due to encouraging higher spending on production (higher yield, animal productivity, etc.). Overall, the impact of the direct payments under SAPS and the national top-up payments on the development of the sector can be summarized as follows: • They help stabilize the income of hundreds of farmers registered in the ISAC (integrated administration and control system). They promote the implementation of the best agricultural practices; • They provide opportunities for higher productivity in a situation of credit crunch in the sector, for higher rent payments, for meeting the needs for fuel, fertilizers, seeds, chemicals, etc.;• The support for farmer’s income strengthens the motivation for engaging in agricultural activity and contributes to the stabilization of the demographic picture in the rural areas; • It promotes land consolidation and the transfer of land to smaller yet more efficient agricultural structures which strengthen their potential and widen their business borders;• The significantly improved availability of land resources to farms also determines their increasedcapacity to uptake the subsidies per decare, promotes their specialization in cereal production and oil crops; • The increased income and improved financial situation of the farms encourages their investment activity. The support under SAPS provides real possibilities for farms to modernize, increase competiveness and improve creditworthiness.

Keywords: CAP; competitiveness; direct payments; government aid

Date published: 2018-04-02