According to Vedomosti, the Russian government is considering the possibility of eliminating the discounts on fuels and lubricants for agriculture producers. The discounts might be replaced by direct government subsidies. If the reform goes ahead, the cost of supporting agricultural producers would be borne by the government, rather than by oil companies. The total amount of subsidies is estimated at around RUB 16bn (USD 510mn).
Were it to materialise, the news would be supportive for Russian oil companies’ financials in 2012. As a reminder, earlier in February then Prime Minister Vladimir Putin was to increase the discount for gasoline and diesel supplied (calculated based on December prices) to the domestic agricultural sector to 30%, from the usual 10%, supporting the sowing season. Since the companies do not disclose the exact amount of fuel supplied each year for the sowing campaign, it is difficult to quantify the positive effect on a company level.