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Books by Grigory Yavlinsky
Economics and Politics in Russia
The Center for Economic and Political Research (EPIcenter)
Nizhni Novgorod-Moscow, 1992

4.1 Entrepreneurship and Property

4.1.6 Projected Privatisation of Collective and State Farms

We propose agricultural privatisation, based on a definition of its scale, timeframes, and most importantly, targets. Most of all, one must elaborate a balance of production and consumption for each type of the region's agricultural produce. On this basis, farms may be grouped according to the cost of their agricultural produce, fixing the growing volume of production, i ncluding commodity production, during the transition from one group to another. On the level of regions and individual farms, this grouping enables a clear-cut distinction of highly efficient farms from the point of view of expenses, and the role of agric ultural produce in production and supply to the population.

This approach is based on the fact that the lower the production expenses on farms, the greater the role they play in the volume of commodity production in agriculture. In Russia about 30% of the most effective farms provide up to 50% of plant output and 65% of livestock production.

The choice of the optimal correlation between efficient agricultural production and its marketability determines, inter alia, the limits of compulsory privatisation. Farms, where production expenses and sale expenditure exceed the level set by the oblast administration, fall within these limits. Those farms not subject to compulsory privatisation (i.e., those which are highly effective and marketable) may carry out partial privatization and commercialisation, as long as technological integrity, specialization, and production volumes are retained. In certain cases, provisional administrative restrictions on reorganization are possible. The remaining farms should not be subject to "voluntary" privatization, but rather actual bankruptcy and change in property relations, with the establishment of the same price proportions and terms for purchase of their produce as for highly efficient far ms. At the moment, meat and dairy production subsidies are paid to all farms, and judging by current developments, mutual debts will be written off. This will prevent a realistic isolation of bankrupt farms.

Conflicts in the privatization of agricultural enterprises

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As of July 1, 1992, a total of 1,941 private farms were registered in the oblast, covering 39,200 hectares, or an average of 20 hectares each. On average, there is one tractor for every two such farms, one truck for every four farms, and one combine harve ster for every 24 farms (data as of March 1992).

In 1991-1992, a considerable redistribution of areas under crop occurred between collective and state farms, on the one hand, and private farms and subsidiary small-holdings on the other.

The total sown area on collective and state farms was reduced by 36 7,000 hectares (by 20.6%), while over the same period, the areas under crop on subsidiary small-holdings and private farms grew by 366.8 hectares (by 275.5%). Analysis of the progress of privatisation and land reform indicates that it is encountering serious conflicts and difficulties on the republican and oblast levels, and in individual farms.

The major problems involve:

- conflicts between the need to guarantee a steady supply of agricultural produce, and the genuine danger of disruptions in its production, owing to large-scale privatisation and reorganisation of collective and state farms;

- the uncontrollable nature of privatisation and land reform, its fragmentariness, and potential "reorganisation" without genuine changes in socio-economic relationships;

- a general deterioration in the economic situation in rural areas, putting the vast majority of collective and state farms, and a significant portion of private farms, on the verge of bankruptcy; and

- the ineffectiveness of mechanisms to support new entrepreneurial structures in agriculture.

As indicated by experience both in Nizhni Novgorod oblast and in Russia overall, the greatest successes in privatisation and increased agricultural production are observed in the development of subsidiary small-holdings, and horticultural and market-garde ning plots of land. For the third year in a row, the country is witnessing a rapid growth in privately owned agricultural areas and the numbers of livestock and poultry. The Nizhni Novgorod authorities are making all possible efforts to assist this proces s via special-purpose allocations of mixed fodder and massive allotment of suburban land for horticultural and market-garden plots and residential

construction. Here one should not be deluded by the high rates of growth in the numbers of private farms during the first half of 1992, and the large number of applications to set up such farms. The areas of arable lands in reserve, especially in suburban regions, are rapidly being reduced, and will remain extremely limited if a realistic resolution of the issues of privatisation of collective and state farms is not found.


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