Committee Reports::Report No. 18 - Processing and Marketing of Agricultural products::31 July, 1985::Report

1.The Joint Committee in this report, considers the efficacy of Council Regulation (EEC) No. 355/77 (as amended by Council Regulation (EEC) No. 1932/84) on common measures to improve the conditions under which agricultural products are processed and marketed in view of criticisms which have been made regarding its operation in Ireland to date.

Acknowledgements

2.The matter was examined for the Joint Committee by its Sub-Committee on Agricultural and Fisheries Matters under the Chairmanship of Deputy Joe Walsh. The Joint Committee is indebted to Deputy Walsh and his Sub-Committee for their work.

The Sub-Committee had discussions with representatives of the Confederation of Irish Industry, Coras Beostoic and Feola, the Irish Co-operative Organisation Society Ltd., the Industrial Development Authority and the Department of Agriculture. It also took into consideration written submissions from these bodies and also from the Department of Fisheries and Forestry and Udaras na Gaeltachta. The Joint Committee wishes to thank all these bodies for their assistance and co-operation.

B. COUNCIL REGULATION (EEC) No. 355/77

3.The Regulation provides grant-aid from the European Agriculture Guidance and Guarantee Fund (FEOGA) towards the cost of capital investment projects which are aimed at improving structural efficiency in the processing and marketing of agricultural products (including fish) with a view to improving quality and presentation and thereby opening up new markets and increasing returns.

4.For the purpose of the Regulation, a “project” means any development involving public, semi-public or private material investment relating to buildings and/or equipment for:-

(a)rationalising or developing storage, market preparation, preservation, treatment or processing of agricultural and fish products;

(d)verifying the technical and economic feasibility of new processing techniques on an industrial scale (pilot projects) and especially the development of new products, by-products and technologies;

(e)energy conservation or removing, recovering and recycling industrial residues or waste in relation to facilities for processing and marketing agricultural products;

(f)harvesting equipment, subject to certain conditions (e.g. if it is an essential element of the project and does not represent more than 10% of the total cost of the project).

The type of investment referred to at (d), (e) and (f) were included in the Regulation from 1 January, 1985.

(a)be consistent with the aims and objectives of the EEC Common Agricultural Policy (CAP). FEOGA funds are directed primarily towards projects which help to guide production in a direction sought by the CAP, involve the development of new outlets for agricultural products, improve quality or presentation, make better use of by-products, help lighten the burden of intervention, shorten or improve marketing channels, rationalise the method of processing products, or are situated in regions which experience difficulty in adjusting to the consequences of the CAP;

(b)relate to agricultural and fish products, i.e. those listed in Annex 11 to the Treaty. However, from 1985 onwards, in certain cases, the Commission may decide that projects involving the processing of Annex 11 products into non-Annex 11 products may be considered for aid under the scheme provided that such products constitute a new important outlet and increase significantly the prospects for disposing of basic products at Community level;

(c)contribute to improving the situation in the primary agricultural sector and ensure producers a share in the resulting economic benefits;

(d)contribute to improving structural efficiency in the processing and marketing of agricultural and fish products;

(e)form part of an overall programme for the Sector (prepared by the Department of Agriculture and the Department of Fisheries and Forestry in relation to the Fisheries Sector) and have the approval of the Member State, which must contribute at least 5% of the cost of the project. A minimum national grant of 8% (16% for projects located in the Disadvantaged Areas of the West of Ireland) is necessary to attract the maximum level of EEC grant aid which may be provided up to a maximum of 25% in the Eastern half of the country and up to 50% in the Disadvantaged Areas;

(f)be financed at least 50% of the cost of the project by the beneficiary (25% in the Disadvantaged Areas);

(g)contribute to the lasting economic effect of the aims and objectives of each sector. The projects’ potential viability must be clearly demonstrated.

On-farm production projects involving modernisation, rationalisation or development of individual farms are not eligible for consideration under the Scheme.

6.The total amount of aid which can be approved in any one year is limited and decisions on whether or not to grant-aid are a matter solely for the Commission. The Commission makes decisions on applications twice yearly (June and December) and applications have to be submitted to the EEC Commission by 31 December for consideration in June of the following year and 30 April for consideration in December of the same year. Unsuccessful applications may be carried forward once to the next financial year. Thus an application is normally considered for a maximum of four tranches and if still not approved for grant, will then be formally rejected.

7.In Ireland all applications for aid under the Regulation and all subsequent correspondence between the EEC Commission and the applicant must be made through the Department of Agriculture. While the Department of Agriculture is the grant-aiding agency in respect of only a small number of projects (those relating to potatoes, eggs and in some cases grain drying and storage) all non-fish projects have to be approval by the Department in order to qualify for grant-aid under the Regulation. In the case of most projects this approval is given prior to a decision by the grant-aiding agency on the national grant.

8.The Industrial Development Authority (IDA) handles the vast majority of cases accounting for some 90% of all FEOGA applications (the balance being handled by the Department of Agriculture, Udaras na Gaeltachta and the Shannon Free Airport Development Company). Applications through the IDA are processed in the following manner:

- When a draft application is received by IDA a copy is sent to the Department of Agriculture or, where appropriate, to the Department of Fisheries and Forestry. The IDA scrutinises the application and receives comments from the relevant Government Department. All suggestions for improvement or modification of the application are then communicated to the company. The IDA then prepares a project grant application for the Board of IDA using the FEOGA application as the base document and requesting further information where appropriate.

-The applicant then submits 5 copies of the finished application. The IDA provides confirmation of Member State grant aid and forwards 4 copies of the application to the Department of Agriculture for transmission to Brussels. The Member State opinion is provided by the appropriate Government Department. The Department of Agriculture transmits 3 copies of the application to Brussels.

-FEOGA division in Brussels acknowledges receipt of the application thereby allowing the applicant to proceed with the project. IDA personnel travel to Brussels at least twice per annum to discuss the list of applications and brief FEOGA officials on developments and priorities. Successful applications will submit claims for payment to the IDA. Normally, an applicant will only be allowed to claim the grant in three instalments with the last application amounting to a minimum of 20% of the total approved. IDA staff validate the grant claim, carry out an inspection of the relevant assets and transmit the claim to FEOGA for payment.

9.In the years 1978 to 1984 grants amounting to £67.6m were awarded to Irish firms in respect of 275 projects which has stimulated investment of approximately £200m. The yearly figures for grants awarded and drawn down are as follows:-

10.In this period grants amounting to £2.9m were either renounced or cancelled for various reasons, e.g. projects not proceeded with or on a reduced scale. These monies are not lost however but are recycled and are re-allocated to other Irish firms.

The table above highlights one of the main criticisms of Ireland’s use of Regulation 355/77, i.e. the slow drawing-down of the grant-aid which is one of the worst in Europe, second only to Italy. The slow draw down lessens the value of the grant-aid due to the ravages of inflation and ties up funds, which the Joint Committee feels, could be more usefully allocated to other applicants.

11.In its memorandum to the Joint Committee, the Department of Agriculture identified some of the reasons for this state of affairs as follows:-

(i)cancellation of grants: grants were cancelled or renounced on eleven projects; however, five of the projects were re-submitted in subsequent years and were awarded grants; two other firms chose not to claim grants because they did not comply with the terms of the award;

(ii)failure to carry out the full investment programme envisaged: this happens in a large number of cases;

(iii)delay in proceeding with projects: this is probably the most important factor. The main reasons for the delay in proceeding with projects would appear to be:

(a)changed economic and agricultural conditions (e.g. the reduction in cattle numbers after 1980);

(b)the high cost of borrowing;

and

(c)some of the firms which were awarded grant-aid subsequently experienced financial difficulties and a number went into receivership: while most of these were bought as on-going concerns implementation of the projects was delayed;

(iv)most of the projects aided are large scale and require a number of years to complete: it should be noted that firms have five years in which to complete their projects.

(v)it is probable that some firms lodge projects well in advance of expected date of implementation so that they can plan ahead in the knowledge that a grant will be available: this is particularly the case where the FEOGA grant is crucial to the project.

(vi)delays at EEC level: the EEC Commission takes two to three months to process claims that do not give rise to queries: claims which are badly prepared can take much longer.

12.Although the Department of Agriculture feels that the take-up of grants is not entirely satisfactory they point out that there has been an improvement in recent years. For example, only 42% of the grants awarded in 1979 were taken up three years later while 56% of the grants awarded in 1981 were taken up within three years. The Department have assured the Joint Committee that the vast bulk of the projects are being carried out and, apart from projects cancelled, only 10 projects awarded grants up to 1983 have not yet been started. It should be noted that firms which do not commence work on projects within two years are liable to forfeit the grant unless adequate assurances that the project will be carried out are furnished. Also the Regulation was recently amended so that firms now only have a period of four years in which to complete their projects instead of five years as heretofore.

13.The IDA or the Department of Agriculture do not exercise any selective process in forwarding applications to Brussels. Even dairy projects have been submitted although these were ineligible in 1984 and to date in 1985 and thus the number of applications received annually for grant-aid is generally in excess of the funds allocated to Ireland under the scheme. Accordingly there is usually a surplus of projects in Brussels. For example, applications for aid submitted to the EEC Commission for the 1984 December tranche sought grant-aid amounting to approximately £30 million although grants amounting to only £6.9 million were awarded. Of the 27 (approximately) unsuccessful projects carried over to 1985, 8 projects were withdrawn and 11 projects were not awarded aid.

14.The Council of Ministers have now allocated 1343 million ECU towards Regulation 355/77 for the five year period 1985-9 with the budget provision for 1985 being fixed at 242.5 million ECU. This represents an increase in the amount of funding available, and Ireland’s share should also increase although this is at the discretion of the Commission and will depend largely on the availability of suitable projects.

C. VIEWS OF INTERESTED BODIES

15.In its submission to the Joint Committee Coras Beostoic agus Feola (CBF) felt that Regulation 355/77 is noteworthy in that by concentrating on the processing and marketing sectors of agricultural production, it is placing emphasis on activities in agriculture “beyond the farm gate”. In the CBF’s view this is a most desirable orientation as, in practice, much of agricultural policy is unduly concentrated on farming or production aspects, at the expense of associated developments in the processing, utilisation and marketing of agricultural or food raw materials.

16.With regard to the question of consistency with the Common Agricultural Policy (CAP) the CBF emphasise that the CAP is unduly, and undesirably, oriented towards:

17.The opposite to this CAP-inspired approach is that of consumer oriented marketing. Whereas the CAP approach is not in fact “market management” but “price management”, such price management is totally directed to the price of the raw material to the primary producer with less attention given to the resultant price of the end-product for the consumer.

18.The higher level of grant-aid for the disadvantaged areas is fully supported by the CBF who see it as a desirable interaction between the Common Agricultural and Social Policies of the EEC which should act in tandem to maintain the rural social fabric through off-farm food processing and marketing employment. Proof of this situation in Ireland is evidenced by the existence of many “food towns”, where employment is mainly dependent on processing of the raw materials produced by the surrounding agricultural hinderland.

19.While the CBF feel that the general thrust of the “common measures” is good the practice has often been bad. The CBF feel it essential that the orientation of the measures move away from primary processing to secondary or tertiary processing. In this regard a more flexible and imaginative approach should be adopted so that any products derived from primary products should be covered for grant-aid purposes. The restriction of qualification for projects listed in Annex II of the Treaty of Rome is a major barrier against further or added-value processing and especially product development of consumer-based products. With specific reference to the meat industry, the CBF refer to recent developments in vacuum-packaged fresh/chilled boneless beef, and the development of consumer pre-packs of meat, which could be processed in this country for supply to supermarket shelves in our major overseas markets within the European Community. Leather is another example of a non-Annex II product which would not be considered for grant-aid, but is derived from the primary product and could be worked to good value.

20.The importance of improving marketing channels (which qualify for grant-aid under the Regulation) is also highlighted in the CBF submission. In terms of servicing most of our overseas markets, distribution is a major limitation. Thus shortening or improving the marketing channel or chain is a highly desirable feature, especially for an export-oriented industry like ours, in terms of maximising marketplace returns. In practise, state the CBF, shortening the marketing chain is attained by getting food products more directly from the processor to the final consumer through -

However despite the critical importance of a distributive capability the CBF would query if many grant applications have been made under this heading. In this regard another drawback is the fact that it is impossible to obtain grant-aid for the location of distribution depots in other Member States.

21.The CBF also maintain that under FEOGA grant-aid, Irish agro-industrial firms have a bad “track record” in utilising all the funds which they have been awarded, and a much greater effort must be made to redress this situation, as it gives this country, and its food industry, a bad reputation at EEC level.

22.In its submission to the Joint Committee the Confederation of Irish Industry (CII) was particularly interested in the fact that the recent revision of the Regulation has extended the coverage of the scheme (under Article 7) so that products not covered in Annex II of the Treaty of Rome would be eligible for aid. In the CII’s view some projects which are obviously very important

have not been eligible for FEOGA assistance in the past, i.e. added-value projects. In essence, the further away from the farm gate the project, the less likely it has been to get FEOGA aid because it is only projects which are very near to the farm that have been favoured. This would mean that the carcase beef trade was aided whereas an added-value project involving prepared canned meat etc. would have much less chance of succeeding. Similarly, a grain drying and storage plant would have easily obtained aid in certain circumstances whereas a company producing flour confectionery would have little or no chance because they are further removed from the farmer. The CII hope that the new extension of the coverage of Regulation 355/1977 to non-Annex 11 products would mean an opening up of the scheme to the classic added-value project of which there is not sufficient in Ireland.

23.In relation to the slow draw-down rate of monies already approved the CII feel that the fundamental reason for this is that in forwarding projects to Brussels, our administration is less than selective - almost all projects are sent without due consideration being given to the real likelihood of their going ahead in the immediate future. This was particularly true in the late 1970 s and the early 1980 s when both milk production and the national herd fell and, quite clearly, projects which had been conceived in anticipation of more milk and bigger kills of cattle were unlikely to be realised as planned or at least as quickly as planned. The CII have suggested that a new administrative approach to the food industry is required, incorporating a Minister for, and a new Department of Agriculture and Food and believe that this approach would help to alleviate the problem of the slow rate of draw-down.

24.Additionally, in the CII’s view enterpreneurs, in sending their projects to Brussels have been too ambitious as to the speed with which they will be completed. Their estimation as to when the project will be complete is decisive in the Commission’s deciding in how many separate payment tranches the money can be drawn-down. All applicants from Ireland would be advised to ask for additional payment tranches where the project is of high value in grant-aid. This would enable the applicant to draw-down the money gradually and not be confined to, say, in the case of a two payment tranche grant, drawing down a 30% in the first and having to wait until the other 70% is spent to draw-down the final payment.

25.The Irish Co-operative Organisation Society Ltd. (ICOS) argue that grant-aid to the dairy section, which has been ineligible since 1st January 1984 under the annual criteria for the choice of projects to be financed under Regulation 355/77, be restored. Now that the superlevy agreement has been implemented ICOS feel that it is important, especially in Ireland’s case considering our dependence on the dairy industry, that grants be made available to the industry to allow it to rationalise, modernise and diversify where necessary.

With greater resources being allocated to FEOGA grants for the future it is according to ICOS, very important that this money reaches the most attractive projects which will yield the greatest economic and producer benefit. In this regard ICOS feel it is worth noting that the dairy co-operatives are among the best at undertaking and claiming cash for projects aided by FEOGA. At October 1984, the multi-purpose dairy co-operatives had a much greater percentage take-up of grants than the national average. Indeed, the six largest diary societies have taken up over 66% of grants as against the national average of approximately 38% and an EEC average of 44%. Also dairy projects have been very successful in ensuring that the primary producer benefits from projects, which is one of the fundamental aims of the Regulation.

26.ICOS feel that it is important that planned projects are completed within the period stated in the applications and that claims are made swiftly. Grants are very important for the economy and it is vital that procedures exist for the withdrawal of grants from companies where projects have not been carried out within a specified period. This money will then go back to other Irish projects.

27.While it is extremely important in Ireland’s case that aid to the dairy sector is not closed, ICOS feel that emphasis should be placed on grants to specific areas where the dairy industry will require incentives. Areas where aid is necessary include:

-Facilities for research and development for new products and new outlets for existing products, including pilot plants.

-Capital expenditure in relation to new added-value products and by-products and new processes (including brand name products).

-Computers, both for the purposes of process control and management information systems.

-Energy conservation measures to increase plant efficiency and recycling industrial residues or waste.

28.While ICOS feel that the amending Regulation 1932/84 would allow for all the above areas to be eligible under the parent regulation they remain ineligible under the published criteria for selection. In ICOS’s view this does not seem logical, bearing in mind the restrictions on the CAP, that projects which will result in increasing the commercial outlets for milk and reduce our dependence on the intervention mechanism will not be encouraged and aided by the Commission. Yet funds are poured into sectors where a lot of planned projects are not carried out and claimed and may not have as high a value to the primary producer and the economy. Also, say ICOS, if dairy projects are not eligible for aid the Commission will have a difficult task filling the tranches as there will be too few good projects and it is likely that the calibre of projects receiving aid will diminish.

29.In its submission to the Joint Committee ICOS also drew attention to the position of livestock marts which would be eligible for grant-aid under Regulation 355/77 but for the fact that no enabling Member State grant is available in Ireland. This situation is in contrast to other Member States and in the case of France and Great Britain, programmes have been submitted to Brussels and approved for aid on the following basis:-

ICOS hold the view that the Irish case is particularly compelling in view of the extra funds available from FEOGA under the Western Aid Package, (i.e. a grant of 50% vis-a-vis the usual 25%) and are satisfied that there is an urgent need for livestock marts to modernise and rationalise. Generally, according to ICOS, the emphasis would be in the direction of necessary improvements both in the quality, and in the range and depth of services provided, rather than extra capacity for handling bigger numbers of livestock. At the same time, there may be situations where extra market facilities may be needed, (e.g. increased penning and extra sales rings), and also certain locations, particularly on the Western sea-board, where extra marts may have to be built to service areas not previously serviced by livestock marts. ICOS have therefore requested the Department of Agriculture to allow for a Member State enabling grant to be made.

30.In its submission to the Joint Committee the Industrial Development Authority (which handles 90% of all applications) emphasised the enormous benefit of the scheme to the food processing industry particularly the dairy co-operatives in the early years. However, there remains a lot of work to be done in raising standards particularly in relation to pigmeat. In this regard the Commission has taken a very favourable attitude towards pigmeat projects and in the recently announced tranche, grant-aided two significant projects in this sector. Because of the sheer scale of the investment in these and other projects the IDA have told the Joint Committee that such projects could not take place if it were not for the Member State and FEOGA grant aids. Indeed such aids are essential to make things happen as has been evidenced in the dairying and beef sectors.

31.On the question of the rate of draw-down of funds the IDA feel that the manner in which figures of grants drawn down are taken up to the end of say 1984 and set against the total grants awarded to that date will naturally yield an inordinately high balance as being outstanding as grants approved in 1984 could not have been paid in that year. The IDA believe the situation to be reasonably satisfactory, while acknowledging that it is not perfect, and that there are companies that have been negligent in this regard. It must also be remembered that in recent years companies have been affected by recession in agriculture and by high interest rates and by a lack of profitability. Accordingly, there has been a certain slowdown in the rate with which projects have been proceeding. On average companies cannot proceed with a project until they have been approved a grant. The Regulation requires that no monies be spent until the application is acknowledged by the Commission. In practice many companies will not begin a project until such time as they know they have definitely been approved because of the dependence on FEOGA grant to enable the companies to satisfactorily carry out the project. Consequently the final planning of the project may only take place after the grant has been approved so there is almost certainly a delay from approval to draw-down and this would certainly affect the recent approvals and the situation from ’78 to 1984.

32.In regard to outstanding IDA applications the balance to be claimed is £17 million approximately and the bulk of these refer to 1982 when there was some £9.7 million approved, and 1983 when £12.8 million was approved for IDA projects. The IDA have refined their procedures on making claims and have encouraged companies to proceed with claims as rapidly as possible. It should also be noted that the Commission restricts draw-down of grants to three instalments and the final instalment must, as far as possible, be a minimum of 20% so that there are instances where projects are 90% complete but still cannot attract the final instalment. There can be operational difficulties in this respect especially in large building projects where retention money is withheld on a building for perhaps 12 months which means that a claim cannot be made for the final instalment until the retention money has been paid over.

33.As stated, the IDA process 90% of all applications and send projects to Brussels, irrespective of the sensitivities of criteria, i.e. even in the last number of years when the Commission indicated that the dairy sector would not be favourably looked upon the IDA still transmitted applications nonetheless and argued subsequently on the merits or demerits of individual cases. Projects which are outside what could be legally grant-aided obviously were not sent. Thus there has always been a surplus of projects in Brussels and on balance the IDA have had three times the numbers of applications in Brussels relative to the amount of the fund that is available.

34.The considerable benefit to the food processing industry in Ireland of the operation of the Regulation is also highlighted in the memorandum received from the Department of Agriculture. The scheme, it is felt, has stimulated a considerable amount of investment in the industry and has helped to improve the efficiency with which it processes the basic raw material. It has also provided incentives towards diversification into value-added products. For example, £12m has been awarded in grants to firms in the beef sector and the bulk of this is related to investment in boning and further processing facilities. The large increase in exports of vacuum packed beef in recent years (from 8,000 tonnes in 1978 to an estimated 22,500 tonnes in 1984) is evidence of the significant investment which has taken place in this area.

35.The scheme has also enabled the industry to address some of the major weakness in the different sectors such as cereals (inadequate grain drying and storage facilities), and poultry-meat and eggs which was in need of considerable rationalisation. In the pigmeat sector, the scheme has helped to improve the slaughtering facilities, where considerable structural reform is required and to enable the industry to diversify into downstream products. The pigmeat. sector has been a major beneficiary of the scheme and has received a disproportionate share of the grants awarded to Ireland 19% as compared with its 7% share of gross agricultural output (for amounts of grants awarded to individual sectors see Appendix). Considerable further investment in rationalisation of slaughtering and downstream processing facilities is required and it is hoped that projects in these areas will be grant-aided by the EEC Commission.

36.Also an essential aim of the Regulation is to improve structural efficiency in the food processing industry and producers must receive “an adequate and lasting share in the resulting economic benefits” [Art. 9(1)]. While it is difficult to quantify producer benefit the Department feel that producers have gained from the operation of the scheme in a number of ways as follows:-

(a)since the food industry has only to fund 50% (25% in Disadvantaged Areas) of its investment programme from its own resources it can afford to pay higher prices to producers;

(b)the structural improvements funded by the scheme improve the efficiency with which the processing sector processes and markets the raw material from producers: presumably, this is reflected in increased returns to the producer; and

(c)the scheme encourages the food industry to develop new products and this helps to stimulate production.

D. VIEWS OF THE JOINT COMMITTEE

37.The Joint Committee viewsRegulation 355/77 as having made a very important contribution to the food processing industry in this country, and the amending Regulation 1932/84 has broadened and improved the content of the Regulation in the right way. The main changes it effected are the following:

-the introduction of the possibility, in connection with projects for the processing of agricultural products, of granting aid for the purchase of certain equipment for the harvesting of basic products, provided that such purchases are profitable for agricultural producers and the costs involved represent only a limited proportion of the investment under the projects concerned;

-confirmation of the need to create new and additional outlets for agricultural products by placing particular emphasis on programmes and projects relating to new processing techniques, pilot projects for the development of new products and by-products and for energy saving and recycling residues;

- the relaxation of the eligibility criteria for projects relating to the processing of basic agricultural products into products not listed in Annex II to the EEC Treaty;

-the introduction of provisions designed to take fuller account of economic trends in the execution of projects and to allow for financial difficulties which may arise for persons implementing projects due to inflation and/or high interest rates.

38.The Joint Committee particularly welcomes the departure from strictly Annex II products in regard to products which are eligible under the scheme. It seems to the Joint Committee illogical that many products which are derived from basic agricultural produce and which, if grant-aided, could benefit the primary producer are ineligible for grant-aid on the basis of their non-inclusion in Annex II (of the Treaties of Rome) which has not been significantly updated since originally drafted 27 years ago and, therefore, does not reflect the significant developments in food processing which have taken place since that time.

39.On the question of the slow rate of draw-down of grant-aid, the Joint Committee is glad to learn that there has been an improvement in this area. Certainly the situation here is not perfect but the Joint Committee would agree with the IDA in that a distorted percentage figure of aid outstanding is obtained by including in the calculation grants which have been awarded but which could not have been drawn down, i.e. 1983 and 1984 awards. Comparison with the performance of other countries can also be misleading. For example, Denmark has the highest rate of draw-down in the Community and of £3.1 million of grants awarded in 1981 had claimed 95% by 1983, i.e. £2.9m, whereas Ireland had claimed £5.5 million or 45% in the same period of its £12.2 million awarded for 1981. While a comparison of the percentage figures is unfavourable from Ireland’s point of view, Ireland in gross terms actually drew down nearly twice the amount drawn down by Denmark.

40.The IDA have assured the Joint Committee that they work very closely with companies receiving aid and give them every assistance they require in formulating claims. In preparing the annual progress report, the IDA request each company for a situation report on each project as well as some form of commitment as to its completion and the likely date when the claim will be submitted. The IDA feel that, taking account of claims in the pipeline, i.e. claims in Brussels awaiting payment or with the IDA prior to submission to Brussels, a more accurate figure of amounts unclaimed would be 34% and that this figure is reducing all the time as the IDA continue to monitor the companies involved.

41.Certainly the Joint Committee hopes that this will prove to be the case. It is aware that there has been a lot of criticism of our performance in this regard and this fact was referred to in the CBF submission which stated that our bad “track record” in utilising all the funds awarded was giving this country and its food processing industry “a bad reputation at EEC level”. The Joint Committee would agree with the Department of Agriculture in its analysis of the reasons for this state of affairs (paragraph 11) that one of the main problems was the delay in proceeding with projects due to changed economic and agricultural conditions, e.g. assumptions were made that the national herd would increase in the early 1980’s which proved to be incorrect. Also, in the early days of the scheme, there were naturally some teething problems and faulty applications gave rise to delays in many cases. However, the Joint Committee is satisfied that our record is improving, although much remains to be done, and is hopeful that we will soon be able to equal the performance of the more successful Member States in this regard.

42.The question has also been raised as to whether the IDA or the Department of Agriculture should be more selective in forwarding applications to Brussels. As has been stated the IDA forward all projects except those which could not legally be grant aided. This results in a situation where at any one time we have projects amounting to three or four times what could be grant-aided in Brussels. For example, in the June 1985 tranche projects seeking £28 million were chasing an actual grant approval figure of just £7 million. This constant surplus of applications does mean however that there is always a sufficient number of good level projects available to take up Ireland’s grant allocation. It must be said also that, if a selection procedure were imposed, the Irish agencies could be criticised from another point of view as a selection procedure would naturally deny some companies the opportunity of having their projects considered in Brussels and in this respect it must be emphasised that it is the Commission and not the Irish agencies which has the final say as to whether a project is grant-aided or not.

43.The Joint Committee supports the view of ICOS that grant-aid for the dairy sector which has been ineligible since the 1st January 1984 be restored. As ICOS rightly point out the dairy sector has been the most efficient in drawing down grant-aid awarded to it and also has been most successful in ensuring that the primary producer benefits from the projects, which is one of the fundamental aims of the regulation.

44.The Joint Committee has been informed by the Department of Agriculture that the Dairy sector programme for 1985-89 was submitted in June of this year and contained a request that Ireland should be treated as a special case, in regard to the Commission’s reluctance to grant-aid dairy projects, because of the importance of the dairy industry to this country and of the need generally to diversify away from intervention type products. The Joint Committee accepts fully, the special case of dairying in the Irish economy and hopes that the Commission will concede the case made to it for grant-aid for this sector.

45.The Joint Committee would also favour the granting of a Member State grant to enable livestock marts to qualify for FEOGA grant aid, which as ICOS point out can be up to 50% in the Disadvantaged Areas. The Joint Committee understands that the Department of Agriculture has been having discussions with interested parties in this regard and hopes that they will shortly be brought to a successful conclusion. It should be noted however that the inclusion of projects for marts could only be undertaken at the expense of other projects as the total amounts of grant aid to this country is set at a fixed amount for each year.

E. CONCLUSION

46.Regulation (EEC) No. 355/77 is a valuable enabling instrument directed at improving the structural efficiency in the processing and marketing of agricultural products. The Joint Committee, while acknowledging the benefits this country has derived under the Regulation, feels nevertheless that its full potential has not yet been exploited. The Joint Committee welcomes the removal of the rigid classification of Annex II and non Annex II products effected by amending Regulation (EEC) No. 1932/84. The Joint Committee would welcome a further amendment of the Regulation in order to broaden the scope of the parent Regulation. It sees the effective operation of Regulation (EEC) No. 355/77 as a means of improving the operation of the CAP through removing the pressure on intervention facilities and accordingly reducing the embarrassing stock-piling of food supplies.

A. INTRODUCTION

Acknowledgements

B. COUNCIL REGULATION (EEC) No. 355/77

C. VIEWS OF INTERESTED BODIES

D. VIEWS OF THE JOINT COMMITTEE

E. CONCLUSION