MILK QUOTAS (Advisory opinion)
PRESS RELEASE
The Italian Competition Authority submitted to the Speakers of the Senate and Chamber of Deputies, the Prime Minister, the Ministry of Agricultural Policy an advisory opinion dealing with distortions on competition and correct functioning of the market, which could derive from certain legislative provisions on milk quotas transfer without selling farm businesses.
The Authority also suggested that Parliament and Government should reexamine the inclusion of the raw material used for DOP (Protected Origin Denomination) products in the Italian milk quota calculation, agreed by EU.
The Authority deemed that the current system of production quotas in the dairy sector is not sustainable in the longer term and contrasts with continuing trade liberalization. As such, this regime is to be changed completely by the Community and its Member States. However, a review of the current quota legislation in order to reduce distortions on competition seems possible straight away.
In virtue of the provisions contained in Law no. 468/92, Presidential Decree no. 569/93, Ministerial Decree no. 762/94, quota transfer without selling farm businesses has to occur prior to the start of dairy campaign and only between businesses based within the same region.
Such temporal and territorial restrictions appear to correspond to neither efficiency nor competitiveness criteria and constitute a further unjustified obstacle to competition among dairy farmers.
There restrictions affect the functioning of the entire dairy sector. In the regions which overproduce with respect to the allocated quota, farmers often have to pay a levy on overproduction, whereby in the regions which underproduce, given the impossibility to sell quotas out of the region, farmers could be induced to declare higher quotas than those really produced, in order to avoid the removal of allocated quotas. The Authority argued that this quota scheme leads to increase fictitiously the total milk production at national level and, as a consequence, lessens the operativity of the compensation mechanism.
To reduce the above distortions, the Authority suggested the opportunity to review the current national legislation to ensure the effective functioning of the milk quota scheme. In particular, the enlargement of the current regional administrative borders to superregional and even national territories seems desirable. Further, it would be preferable that milk quota transfer without selling businesses was allowed also during the dairy campaign.
These changes would improve the quota scheme functioning and make it adequate to dairy farmers' needs, whilst taking into account the distribution and environmental reasons of the legislation which are protected otherwise.
Such changes would also introduce more transparency in the entire quota system, as well ensure more correspondence between declared and effective production.
A major mobility of milk quotas within the national territory might also favour competitiveness of the dairy industry and especially the DOP products whose expansion is limited by the difficult supply of local raw material. Furthermore, the DOP products, by reason of their high value-added nature, do not fall within the scope of Community agricultural policy.
The Authority therefore suggested that Government will take any proper initiative at Community level to request the exclusion of milk used for local DOP products from the calculation of the total quantity of milk quotas allocated at national level.