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“Factory mills and the country are developing problems in increased import conditions”

“A number of factory mills in Georgia are deactivated or working at half capacity,” reads the statement made by the chairman of the wheat association, Levan Silagava. “The “Tbilisi” mill, the Tibiti group factory and Barzo, Ltd in Tbilisi have stopped functioning. The reason for this is increased flour import from Russia. Russia defined the pre-export tax for exported wheat at 15%. Russian wheat influx in Georgia was replaced with flour import, which caused Georgian factory mills to stop.”

“Because of the devaluation of rubles, a larger-than-expected amount of wheat was going out of Russia. This was a prerequisite for Russia to first completely forbid wheat export and to then give it a completely legislative form – by introducing a pre-export tax of 15% – 7.5 Euros.

We were bringing in wheat in very small installments, primarily via vehicles through customs, and due to the quantity of the wheat the price has virtually risen by 2-3 Laris. One sack of wheat used to be 35 Laris and now it’s sitting somewhere between 37 and 38. For today, all this is a cause of Russia becoming active in bringing out not wheat, but flour, since there’s a large imbalance between wheat on the local, as in the Russian market, and the wheat for export. A single ton is worth 150-160 dollars on the Russian market, when the export market shows a pricetag of approximately 260 dollars.

A large number of our mill factories are either deactivated or working at half capacity, and those that are end up being forced to work within the prices that give no possibility of achieving prime cost and sometimes even plummet below it. Stopped mill factories will cause staff reductions,” – Levan Silagava.

According to Silagava, both Armenia and Kazakhstan are facing the same problem. At this point Armenia sees practically its entire mill factories shut down. The increased flour import was brought before the government. The association presented the Trade Defense Measures” law to the Ministry of Economy two years ago but it hasn’t been discussed to this day. According to Silagava the bill could be presented to the parliament in summer, although before it’s passed a number of the mill factories may already be shut down.

“If we compare the wheat mill activities with the flour import, it’s abundantly clear that the country is in much bigger requirement of the mill factories remaining operations. The mill factories create an internal product while operating, and the taxes for internal products go into the budget and atop everything else new jobs are created. Apart from this, the mill factories are bound to internal wheat production, while also producing bran which is bound to animal farming, meaning this is an entire system of internal production which benefits any government. We brought this matter before the government because both the factory mills and the country are developing problems in increased import conditions.” – Levan Silagava