Prospective impact of the implementation of modulation in Hungary in the case of direct subsidies – Model calculations on the basis of values in the grant year of 2012

Vásáry, Miklós

Keywords: SAPS, top up, subsidy redeployment

The redeployment of subsidies through modulation was a new element in the system of Hungarian agricultural support in the premium year of 2012. According to the pro-cedure, if the total amount of first pillar direct subsidies exceeds EUR 5000, a 10 per cent grant reduction should be applied, while if it is above EUR 300 000, the reduction should be increased by a further 4 per cent.
In harmony with European Union principles it has become possible to create a sys-tem in Hungary which enables the radical moderation of actual volumes of subsidy re-deployment resulting from modulation. In this course, unused top up funds are also part of the calculation. This provides substantial room for manoeuvre in the Member States in order to ensure that the direct payments to be paid to producers are reduced as little as possible. These items soften the impact of the measures because – according to the related legislation – the reduction should first be made on the account of these.
The basis of the model calculations was the finalised data of the Hungarian Agricul-tural and Rural Development Agency regarding payments in the premium year of 2011. By correcting this, the special features of the premium year of 2012 were also trans-ferred to the data. The results of the calculations show that the implementation of the Hungarian method has led to in reduced payments only in the case of 2 per cent of all the farmers eligible for direct subsidies, and about 10 per cent of those who are actually involved in payment reduction. Owing to the applied procedure, the withdrawal amounted to almost EUR 11.6 million in the case of the approximately 3 000 farmers concerned. For this group of producers, about EUR 45 million should not be with-drawn due to the mechanisms which enable mitigation. This amount will be left with the producers. In the case of producers affected by modulation, the withdrawal amounts to 3 per cent of the transferred direct subsidies.

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