The government of Albania has allocated an additional amount of $5 million to increase its tax-free oil support scheme to over 1.4 billion lek or $14 million for farmers throughout the country under the most recent Social Resistance Package.
For a second consecutive year, the Ministry of Agriculture and Rural development planned funding to tax-free oil subsidies in a bid to support development of the country’s agriculture sector. Farmers cultivating wheat, corn, maize, beans, sunflower, oats, rye, aromatic-medicinal plants, etc benefit from tax-free oil under the government’s subsidies scheme.
Prime Minister Edi Rama met with local farmers and beneficiaries under the tax-free oil scheme in the village of Jube, Durres municipality, to discuss the measures as part of the government’s social resistance package designed to cope with the rising prices and energy crisis.
The Minister of Agriculture and Rural Development Rural Frida Krifca, the Minister of Economy and Finance Delina Ibrahimaj, as well as the Mayor of Durres Emiriana Sako attended the meeting.
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Good afternoon! Thank you very much for your presence and for joining us today although it is a day off.
Together with the Minister of Agriculture and Rural Development, the Minister of Finance, and Durres Mayor, we are here to briefly discuss the situation, the Social Resistance Package, as well as the sector you directly contribute to, namely agriculture.
A lot of debates and discussions are going on and controversial opinions over agriculture are being expressed today and for some time now, as some speak out relying on the reality of facts regarding agriculture, while some simply express their opinions as outsiders and about realities often negatively painted by the media, in the sense that the media sometimes tends to provide only negative news reports and this is what they are somehow tasked with or they do so because of scant, or little or no knowledge about agriculture.
There is really no comparison between today’s agriculture and its situation seven or eight years ago. There is no comparison in this aspect. Undoubtedly, the Albanian agriculture sector faces problems and has its shortcomings and farmers definitely encounter many difficulties and the agriculture sector still faces a serious challenge, namely the challenge of mindset that is somehow hampering the sector’s progress in various areas across the country. However, the mentality and farmer’s approach have totally changed in other parts of the country that are clearly making progress in terms of development of agriculture.
By mentality I mean the trend of working separately in fragmented land plots.
One cannot progress in agriculture by thinking and working individually. Progress can be only made if forces are joined and this should of course not be done like it was the case in the past, when farmers were forced to work collectively, but instead farmers should now decide on their will to join forces and their fragmented land plots and coordinate efforts, the crops they should grow, the same commodity they need to grow over large land areas and ways how to jointly sell their produce. This would be the key to the farmers’ success in all the areas where intensive farming and agriculture are underway and where exports are growing.
Whereas farmers can end up throwing away rotten crops and products in the areas where they operate individually in fragmented smaller land plots, as they produce smaller quantities and find it tough to sell their products or decide to sell them at a very low or cheap price. This is not the case with the united farmers as they sell quality products together at satisfactory prices.
On the other hand, I would also like to highlight two or three facts.
The area of cultivated land in Albania has doubled compared to seven or eight years ago. This fact alone would suffice for everyone to realize that Albania’s agriculture has made a huge leap forward and hasn’t absolutely moved backward. On the contrary, the country’s agriculture has an added huge potential for further development.
Second fact is certainly connected to the first one that the doubled cultivated agricultural land can be clearly demonstrated through the increased exports and the current export-import ratio, as the agricultural exports are rising steadily and sustainably. It was just a few years ago when the export-imports ratio was 1 to seven, with one unit representing exports and seven representing imports. This ratio is 1 to 3 currently, which means that local agriculture production has significantly increased as the arable and cultivated land area has expanded twice as much and production has grown.
The third fact is about the increased agricultural production and growing exports. Albania’s agricultural exports have risen to about half a billion of dollars from $120 or 125 million including the fishing sector.
The value of the country’s agricultural exports is estimated to be over $500 million and it is our ambition to increase exports to over one billion dollars by the end of this term in office. However, the area you live in was actually severely affected by the earthquake, which forced us to totally alter the development plans and instead deal with quake effects and support reconstruction.
As we make our own plans and keep working as part of our efforts and ambitions to progress and move forwards, an earthquake hits the country, followed by the pandemic. And as if the first two weren’t enough we now have to deal with the effects of a war that is being fought elsewhere, but whose impact is being felt here and throughout the world as today’s global economy is strongly interconnected. The impact of this war is being felt in Australia too, which has nothing to do with other continents, yet prices of commodities went up in Australia as well precisely because of this war in Ukraine and one should be really determined and willing not to see, listen and understand, but instead keep saying the war has nothing to do with us as whole world is facing this situation as it is not about a conflict between two neighbourhoods. One of the world’s largest trading powers, Russia has waged a war. Russia is a big trading power for the fact that it is home to a considerable part of natural resources, oil, gas and other important raw materials, including iron and corn in Europe and a wider region. And Russia has invaded Ukraine, also a leading producer and exporter of corn, as well as iron and other important raw materials. Two large trading powers are involved in a war, but they also represent two important markets and are having a huge impact on the whole world. As we speak, a good part of major public and private investment projects have been temporarily suspended. Construction projects have been suspended, because the price of iron has tripled. The reason why public investment projects have been grounded is because the contracts with builders of Llogara Tunnel and other important infrastructure projects were signed when the price of iron was three times cheaper than today. Iron is an essential material in construction projects. And companies claim they can’t go on with the contract implementation, not because of our failure or fault, but because of a force majeure, namely the ongoing war which is a clause that is included in contracts to remove liability for natural and unavoidable catastrophes. They say they won’t be able to enforce the contract according to the agreed terms, because they would go bankrupt. What are we supposed to do now? Should we increase funding or suspend these projects until this situation is over?
But many cut it short by claiming that we should give up and cancel all these projects for good and instead provide cash handouts to people.
It is easy for everyone to call on the government to abandon investment projects, but such a decision would make thousands of people jobless and would deprive the state budget from millions in revenues that would be collected from these investments.
Third, if we were to call off these investment projects, such a decision would send the country into a spiral of economic downturn, because investments can grow the economy. For us to increase wages and pensions we need to increase revenues first but we can do so by growing the economy only. But the economy can grow through investments.
If everyone were to refuse to work, stop digging and cultivating the land, this would lead to collapse. This is also the case with the state and the state budget. The state would collapse if the state budget would fail to collect revenues and instead just provide funds for expenditure? This is elementary logic.
Meanwhile, you should all keep in mind the fact that no other country has done what we are already doing. I came across news stories showing that France has provided compensation, but not a complete one. We are granting full compensation for the electricity bill. Many claim that Albania should not face a power crisis as the country has been blessed with rich water resources. Yes, it is true that God has blessed Albania with rich water resources, but the country’s domestic electricity generation depends on hydro power and rainfall. In other words, electricity generation depends on rainfall, snowfall, water inflows and rising water level at the main dams of hydropower stations.
This is the third consecutive year when rainfall has been insufficient and this means that water level is dropping to the technical point where the turbines must be stopped.
Power generation should now stop, because if we are to totally discharge the water from the dam, the country would collapse. There is a technical level when electricity generation should stop. But if generation is suspended we would face power shortages and therefore we would be forced to import electricity at mind boggling prices.
We have embarked on this path for some months now and what we should all know is that this is just the beginning of March. Crisis has just started to show and send its initial troubling signals since the end of September. It is early March and a long dry summer lies ahead and this means we would have to use extensive state budget money to purchase electricity at extremely high prices so that household consumers and businesses face no power shortages.
I agree that costs are going up and this is because of the overall crisis. However, would any of you agree that the value of electricity bill increases twice as much? The electricity price and bill could even record a twofold, a threefold and even a fourfold increase in certain cases. Would any of you accept this?
Fuel is also an important commodity for everyone. Cars and vehicles are definitely important, but most importantly you should use off-road diesel fuel for your tractors and other agricultural equipment and not for your cars. It is easy for anyone to call on the government to remove fuel taxes, but we would be unable to provide compensation to the rest of the people and categories if we were to ever make such a decision.
We have made our choice. We won’t remove taxes on fuel, because such taxes affect car and vehicle owners only. A car owner means he can afford to pay for it.
The fuel taxes affect commuters and that’s why the government has decided to support public transportation service so that no increased fares and ticket prices are applied. So, in order for the urban transportation operators not to increase fares for commuters the government will provide 100 lek in subsidies for each litre of fuel used by public transportation buses.
The fuel taxes affect farmers. That is why the government has allocated an additional amount of $5 million to increase the tax-free oil scheme for farmers to 1.4 billion lek or $14 million. They will be provided a quantity of fuel to compensate for the rising price. The applications for support under the tax-free oil scheme are already underway. The application process will be postponed until March 30. We will provide tax-free fuel to all applicants who meet a set of simple criteria.
Retired people do not own cars, they do not pollute the environment and therefore they don’t have to pay a circulation tax and the carbon tax. However, we can’t send a twofold or a threefold increased electricity bill to retirees. The same goes for the disabled people, tetraplegics and paraplegics who don’t own and drive cars, but they can’t pay increased electricity bills just because some call on us to remove fuel taxes on the motorists. Anyone owning a car or a vehicle certainly can afford more. It is as simple as that.
The cabinet members, including me, other state officials and MPs who use cars will see their fuel quantity halved and they would have to pay themselves if they want to use their cars beyond the limit granted by the state.
So, it is a simple concept: he who has more, he will make a little more sacrifice than the others. And this is definitely a sacrifice that should be made. Definitely, war causes all of these. Yesterday I met with the chief executive officer of France’s Total, one of the world’s largest oil, gas and energy companies. The company representatives are on a visit to Albania as they are seeking to invest in Albania, and he clearly told me: “The hit to the global oil market is a result of the extreme uncertainty triggered by the war. It is not the oil production that has decreased, but uncertainty has gone up.” All countries with oil reserves have raised the price.
If the war ends and uncertainty decreases, the fuel prices would fall immediately, because that is how the world economy works today.
In the meantime, company Shell is carrying out important oil and gas explorations and they have discovered gas reserves in Shpirag and feasibility study is underway to see whether this discovery is financially feasible for them, as they have conducted very deep drills and it is about large quantities of gas that would really change Albanian economy. However, it has yet to be tested whether it would be totally profitable as the drilling and extraction cost is really very high. Italian company ENI is also conducting explorations, together with two other leading companies. France’s company Total is equally large and a leading company yet they are not interested in Albania’s oil reserves.
Yesterday we discussed projects on solar power and wind power, hydropower, liquefied-gas fuelled thermal power from offshore platforms, and offshore solar panels. However, they ruled out any project on Albania’s oil reserves. They showed no interest in Albania’s oil as it is viscous oil and the refining cost is extremely high and producing diesel or gasoline costs dearly and it is more expensive than importing it from the other side of the world.
How would we explain this to those who claim that “Albania is rich in oil reserves and power reserves.” Our oil is not like as they claim it to be. “The refinery is state-owned. Building a new refinery would cost a lot and the government cannot afford constructing it.
Second, building another Ballsh-like refinery here would turn out to be catastrophic. We had the refinery, but no investor took over it since refining our oil was a very expensive process. These are facts everyone should bear in mind.
Before I give the floor to the colleagues attending this meeting, I would like to reiterate that the government will do whatever it takes to deal with this huge challenge befalling us again. We will do everything by primarily granting support for those most in need, farmers and other social categories. However, we should take prudent steps since nobody knows how long this crisis will last.
An extraordinary NATO summit will take place for the first time ever this Wednesday and it remains to be seen what decisions will be made by the Alliance.
We don’t know how long the crisis would last and the course it would take. A ceasefire hopefully can be reached sooner, God willing, but there may not be too. Negotiations are underway, but no solution is in sight. However, a ceasefire wouldn’t mean the end of the war. There could be reached and observed a ceasefire until a final agreement is reached. But peace negotiations can fail. The ceasefire can last several months or even more, but nobody knows for sure.
That’s why we should be mentally and psychologically well prepared to resist. This is resistance and that’s why we have told fuel suppliers, wholesale and retail operators, as well as wholesale food suppliers that this is not the moment for them to reap benefits and boost their earnings and profits. This is all about resisting and fighting. The companies should not definitely operate at losses, because they would go bankrupt and therefore we would run out of supplies and this shouldn’t happen. However, they should do something more than others.
We can ask neither retired people nor farmers to make sacrifices. We can’t ask commuters, people with disabilities and needy households to make sacrifices. Thank you!
Before I give the floor to Ani, I would like to highlight something for everyone to understand how the war is having its impact here. The price of urea has gone up, as you already know. However, what I found out is that being uninformed is absolutely the most natural thing and one cannot know everything. One can be blamed for his or her ignorance when you know nothing about a certain subject, yet you still keep speaking about it.
In my capacity as Prime Minister I have had to learn a lot of things I didn’t know previously and anytime something impresses me and I don’t know it, I just simply ask experts about it and consult with the official data. And given the high number of complaints over the urea price I also ask for possible solutions.
Around 80% of urea is produced in Ukraine and the price increase happens for two main reasons.
The first reason is that production and trade have already stopped as the country is being attacked militarily.
Prolongation of the ongoing crisis may cause us to face fuel and oil shortages, power and urea shortages. Why? This may happen as the markets may run out of these commodities.