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It Is Entirely Possible to Get Support

Sergei VOLOGODSKY, Deputy Director, Industry Development Fund

What support mechanisms offered by the Industry Development Fund are available to the automotive industry?

Primarily, financial ones. IDF provides industrial companies with 7-year 5% interest loans for establishment of high-tech production. Automotive companies have already applied for them. Thus, the Kostroma Automotive Component Plant received a 300 million ruble loan for its 2 billion ruble project. The plant intends to launch manufacturing of Euro-4 and Euro-5 buckets and sleeves to substitute imports. Their products will satisfy the demand of the Russian engine manufacturing industry as well as international automobile manufacturers localized in Russia and the CIS: Volkswagen, Renault, Nissan, Ford. The plant is expected to edge out foreign competitors as there is no supply of comparable quality and price in Russia.

200 million rubles were granted to the Yaroslavl diesel plant. They are going to manufacture high pressure fuel pumps for Euro-5 and Euro-6 standard accumulator-based fuel supply systems. This will substitute imports in diesel engine manufacturing – one of the key areas of mechanical engineering. Common Rail high-speed diesel engines with electronically controlled accumulator-based fuel supply systems are used in automobile, tractor and shipbuilding, as well as in farming and specialized machine manufacturing.

The IDF also has a Consulting Center that provides comprehensive information and analytical assistance in obtaining state support from the Russian Ministry of Industry and Trade. The center helps applicants to prepare documents for participation in the ministry’s various programs, which include subsidies for partial compensation of interest payments under loans designated for new investment projects and current operations, project financing and other programs.

The IDF has also become an operator for execution of special investment contracts (SIC). The fund provides assistance on all stages of SIC execution, including preparation of documents for submission to the Ministry of Industry and Trade, and works closely with Russian constituent subjects. We monitor development of normative legislation relating to the SIC, collaborate with business associations (including foreign ones) to prepare proposals for adjustment of current Russian legislation.

The special investment contract is one of the most demanded measures of state support. What advantages does it offer to automobile manufacturers?

The main advantage is that it guarantees that business conditions for the investor will not deteriorate throughout the term of the contract. For any investment project, and the automotive industry is no exception, stability is one of the most important factors. The SIC also allows investors to receive certain tax benefits: the federal part of the profit tax can be nullified and the regional part reduced. Regions can provide additional relief from property, transport and land taxes. If project investments exceed 3 billion rubles, the Russian Federation government can designate the SIC investor or its appointed person as the exclusive supplier of the relevant product to state and municipal agencies. SIC parties are entitled to a simplified procedure of confirmation of industrial manufacturing within Russia (as established by Russian Ministry of Industry and Trade Directive No.3568 of 12.11.2015 implementing Russian Federation Government Resolution No.719 of 17.07.2015), as well as some other sectoral measures of industrial activity stimulation. Thus, automobile manufacturers can be eligible to subsidies.

How does the Fund collaborate with regional manufacturers? How possible is it to secure the fund’s support?

Conditions are the same for all regions. Companies can apply from anywhere. Applications and documents can be submitted electronically through the fund’s website. Interested parties apply through their online accounts. They can also get consultations and required assistance in preparation of documents by phone, email or personally.

It is entirely possible to get support: the IDF expert council has already approved 110 loans for 32.1 billion rubles. Kaluga Region is using the special investment contract as a timely measure of automobile manufacturer support secured by the legislation of the Russian Federation. The Russian Ministry of Industry and Trade expects such contracts to stimulate development of Kaluga’s automotive industry. Their purpose is to encourage investments in establishment and modernization of industrial manufacturing within Russia by offering investors benefits and preferences and ensuring business stability provided the investors perform their obligations with regard to such establishment and (or) modernization of industrial manufacturing.

Volkswagen and Volvo have already submitted applications for execution of special investment contracts.

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