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New vineyards will be created and the wine industry will be modernized
On August 3, 2018, the President of the Republic of Uzbekistan Shavkat Mirziyoyev held a meeting devoted to issues of expansion of vineyards and development of winemaking, increasing production and export of wine industry products.
In accordance with the resolution of the President of the Republic of Uzbekistan “On measures for fundamental improvement of wine industry and sale of alcohol products” of February 28 this year, the “Uzsharobsanoat” Joint Stock Company was reorganized, its new organizational structure was approved, and management was updated. A number of tasks have been identified for expanding the vineyards and development of winemaking.
The analysis of the state of the industry shows that there is practically no growth in it. So, in the first half of this year, 62 production entities of the industry produced wine and alcoholic products worth 951 billion sums, which is 1 percent of the total volume of industrial output produced in the country. During this period, industrial production in the country grew by 11 percent, and growth in this industry amounted only 0.9 percent.
The level of loading capacities on manufacture of vodka, wine, alcohol, champagne has decreased. Indicators of the first half of this year are much lower than the same period of 2017. The forecasts for production of vodka and wine have not been fulfilled. To address this problem, industry leaders should separately examine the activities of plants that have allowed a significant reduction in the level of capacity utilization and take appropriate measures. Before, there were cases when factories of the industry used the bulk of their capacities for “shadow” production. Henceforth, it is necessary to prevent the occurrence of this phenomenon, known as the “second line”.
In production attention is not paid to the balance of product varieties. Over the past ten years, the production of wine from grapes has decreased by 2.5-3 times compared to liquor and vodka products. This is explained by the fact that primary wine-making enterprises, with capacities for processing 200 thousand tons of grapes and harvesting 14 million decalitres of wine materials, use only 15 percent of their capacities because of a shortage of raw materials. Only 25 percent of enterprises that produce wine materials have been modernized, while the rest still use equipment installed in the 1990s. As a result, 25 enterprises capable of producing nearly 4 million decalitres of bottled wine are loaded only by 57 percent.
Among the main reasons – a sharp reduction in the area of vineyards of wine varieties and a decrease in their yields. There are 73 thousand hectares of vineyards in the country, wine grape varieties are cultivated on 10 thousand hectares, including 4.3 thousand hectares of vineyards belong to the enterprises of “Uzsharobsanoat” JSC. This amount does not cover production needs. In this regard, in February of this year, “Uzsharobsanoat” enterprises were tasked to increase the area of vineyards of wine varieties to 10 thousand hectares by 2021.
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At the meeting devoted to issues of expansion of vineyards and development of winemaking it was noted that by now seedlings of grapes of wine varieties have been planted only on 390 hectares. By the autumn it is planned to create vineyards on 2.5 thousand hectares out of 6.8 thousand hectares of land allocated by khokimiyats.
The reason for the crop failure and, consequently, the lack of raw materials are the passiveness and indifference of agro firms of “Uzsharobsanoat” JSC. Grapes are grown on 1.1 thousand hectares of land belonging to 21 agro firms, the remaining 1.3 thousand hectares are not developed at all. These agro firms completed the 2017 with a loss of 3 billion sums.
Taking this into account, responsible persons were instructed to develop a five-year program on accelerated development of viticulture and grapes processing, modernization of existing and creation of new production capacities on production of alcoholic beverages.
It was noted that when developing the program, it is necessary to provide for measures on allocation to winemaking enterprises not 10 thousand, but 20 thousand hectares for the organization of vineyards of wine varieties and modern seed plots. It is also necessary to include in the list of conditions the issuance of licenses to wine and vodka factories of requirements on creation of vineyards of wine varieties and organization of production of ready-made wine products, to critically review the activities of agro firms in “Uzsharobsanoat” system, to develop measures on providing undeveloped or inefficient land to private owners for cultivation of wine grape varieties by the cluster method.
It will take time until new vineyards start harvesting. They should use it wisely and arrange production of wine, vinegar and cider from various fruits. This will also prevent the loss of fruits that remain unprocessed. “Uzsharobsanoat” JSC should study foreign experience and internal opportunities, envisage in the new program of measures on organization in the current year and expansion in the future of wine and other fruit products.
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At the meeting chaired by President Shavkat Mirziyoyev on August 3, it was stated that it is necessary to include specific measures on sharply increasing the export of the industry’s products into the new program on accelerated development of viticulture and grape processing. Domestic alcoholic beverages are not in high demand abroad, the bulk of exports are wine materials. In the first half of this year, the volume of exports amounted to 9.6 million dollars, or 85 percent of the forecast.
As it is known, such grape varieties as “Pinot noir”, “Chardonnay”, “Sauvignon blanc” are not grown in Uzbekistan, allowing to produce wine at the level of world requirements. Importation of their seedlings is prohibited by the State Plant Quarantine Inspection because of the risk of spreading phylloxera, an insect pest of grapes. Therefore, it is necessary to import not saplings, but cuttings of the specified varieties and multiply them in seed plots in conditions of strict quarantine. In this regard, the State Plant Quarantine Inspection was given instruction on studying the experience of countries with developed winemaking and preparing proposals for the import of certified varieties of grapes.
Unsatisfactory level of activities in attracting direct investment in the industry was noted at the meeting. Despite the fact that most enterprises of “Uzsharobsanoat” system use obsolete equipment, winemaking and production of alcoholic beverages are one of the attractive areas for investment, it accounts for only 0.5 percent of currently used investments. This year 31 projects worth $59 million are implemented, which is 2 times more than in the last year. However, there is a low probability that at least half of them will be completed by the end of the year.
At the same time, as a result of passivity and indifference, 21 projects worth 101 million dollars, not related to the industry, are implemented without attracting foreign investment. Of these, 15 cannot be completed before the end of the year.
Responsible persons, taking into account all this, should form a list of projects on development of winemaking and modernization of production of alcoholic beverages in a two-month period with involvement of foreign investments worth at least $300 million and determine measures for their implementation within the framework of investment programs for 2019-2022.
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Another important issue – prevention of cases of clandestine production and sale of alcohol products was considered at the meeting devoted to issues of expansion of vineyards and development of winemaking. To do this, it is necessary to widely implement information technologies. The Ministry for Development of Information Technologies and Communications and “Uzsharobsanoat” JSC were instructed to take measures on development and introduction, by June 1, 2019, of an electronic system that provides control over the movement of alcohol products through the chain “manufacturer – wholesaler – retailer – consumer”.
During the discussion of the industry leaders’ proposals on phased elimination of monopoly in alcoholic beverages sale and privatization, the need was noted for in-depth study of this issue, taking into account prevention of various speculations, in particular “second lines”, and new schemes for concealing profits, assessment of the impact of implementation of this proposal on admission to the budget of excise duties and value added tax, how the records of produced and sold products in general will be maintained. An appropriate conclusion on this issue should be given by the General Prosecutor’s Office and the State Tax Committee.
The issue of preventing penetration of smuggled alcohol products and ethyl alcohol into the territory of the country was also considered at the meeting. It was noted that the State Customs Committee together with law enforcement agencies should pay special attention to carrying out operational measures on eliminating this problem.