Annex II. Technical sheets per measure.

Measure 1: Investment in Agricultural Holdings

1. Introduction:

The measure is a part of the rural development programme and is to be co-financed by EU (SAPARD).

EU membership and introduction of EU Common Agricultural Policy will change the prerequisites of agriculture significantly. The competitiveness on the internal market for agricultural and food products require the speeding-up of the structural development of farms and the improvement of quality and production conditions.

The strategy in RDP for Lithuania is to improve farm income, living and working conditions in rural areas by improving the productivity, quality, hygiene and environmental standards according to NPAA. At farm level it will be achieved by investments in production facilities (buildings, machinery and equipment) co-financed under the SAPARD pre-accession programme. The measure will be applicable for the whole rural areas of the country but the support level will be higher for applicants from Less Favoured Areas (LFA), for young farmers and for farmers engaged in organic farming.

The land reform, based on land restitution, during the last decade have had an impact on small size of agricultural production structures. Currently, in Farm register there are registered 67,4 thous. Farms, which have an average size of 12,5 ha. Small farm structure does not allow o specialise production and to accumulate capital for modern production technologies. These are the reasons for relatively high production costs and low quality of products, which create obstacles to compete in internal EU market.

Priority of support under this measure will be given to primary milk production. During the period of 2000-2006, it is foreseen to allocate 63,6 per cent of public expenditure to primary milk production. In 1998 it made up 18 per cent of gross agricultural output and 43 per cent of cattle production output. In  course of land reform, there has been developing an unfavourable structure of milk production. In 1999 there was 97,5 per cent farmers who kept 1-5 cows. Therefore, about 70 per cent of milk is produced by small producers. During the last couple of years milk producers started to receive support for investments from the Rural Support Fund. As a consequense, structure of milk farms was improving and specialised milk farms were developing. Since 1999 number of farms which have more than 6 cows has increased by one fifth. Milk output per cow is increasing as well; productivity of controlled cows is 4250 kg/year.

Despite the positive structural changes, in 2000 only one third of milk, delivered to the dairies has reached the EU quality standards. Small size of cattle herds, absence of milking and cooling equipment, poor quality of fodder make an impact on milk quality. Investments into these areas will be supported under the SAPARD programme, while investments in renovation of cattle herd will b financed from the national Rural Support Fund.

Compliance of raw milk to the EU standards would ensure competitiveness of dairy products in the internal EU market because around 90 per cent of milk is delivered to produced by the certified dairies.

In recent years grain and flax production was concentrated in the most fretile midlands of Lithuania, where the speialised farms are developing. Therefore, support will be given to specialised farms, investing in grain and flax harvesters and crops’ and seed bed’s dryers.

In meat sector, small farms are prevailing as well. Here the aim will be to support specialised beef cattle meat and pig meat producers. In order to improve meat quality, there will be supported breeding programme from the national Rural Support Fund, at the same time, buildings and fodder preparation technologies will be supported under SAPARD. In poultry sector, there will be supported investments related to ensurance of animal welfare.

Development of fruit and vegetable sector is related to better employment opportunities in rural areas, shifting from traditional agricultural production (milk, meat, crops) to more labour intensive production. This is also related to meeting domestic demand for fruit and vegetables in the internal market. Supply of fruit and vegetables, produced in Lithuania, satisfies only 30 per cent of domestic market demand. Especially poorly developed are post harvest technologies, there is lack of vegetable storage facilities, packing and freezing equipment. SAPARD support will be directed to acquisition of such equipment.

Change of farm structure from large to small private farms, has made environmental problems very important. Previous large scale manure treatment and utilisation capacities and equipment are no longer suitable o small structure farms. Therefore, seeking to solve such problems, beneficiaries of SAPARD aid will have to respect recommendations of the Good Agricultural Practice code.

Another important aspect is compliance with animal welfare requirements. Beneficiaries, investing into primary agricultural production will have to ensure compliance with animal welfare requirements.

2. Linkage to other measures:

The provision of grant aid to farmers for the purchasing of new farming equipment and modernisation of farms will lead to better cultivation of land, better production conditions, higher quality of produce, yields and efficiency for traditional production related to crops and husbandry. Therefore, all these factors will contribute to implementation of measure 2 “Improvement of marketing and processing of agricultural and fishery products” and overall competitiveness of Lithuanian agriculture.

3. Objectives:

3.1. Improvement of structure of agricultural holdings, increase of family farm size and development of economically strong agricultural units;

3.2. Improvement of farm efficiency by reducing costs of production and increase the competitiveness of Lithuanian farms and agricultural enterprises;

3.3. Increase the level of income and improvement of living and working conditions of the farming population;

3.4. Promoting reorganisation of production in order to implement EU requirements on hygiene, sanitation, animal welfare and environmental protection;

3.5. Promotion of quality improvements of agricultural produce according to EU standards and NPAA;

4. Priority sectors

Based on the analysis of Lithuanian agricultural production, Lithuanian authorities have agreed within the framework of the SAPARD programme to grant aid to the following sectors:

Sector 1 – Milk

Sector 2 – Meat: cattle, pigs, sheep and poultry

Sector 3 – Fruit and vegetable

Sector 4 – Crops: flax, cereals

5. Eligibility criteria:

5.1 General (applicable to all projects under this measure):

5.1.1. Application is submitted by an applicant, eligible for support under the SAPARD programme  (see definition of the final beneficiary);

5.1.2. Project assures compliance with Community standards regarding hygiene, veterinary, sanitary, food quality, animal welfare and environmental when its implementation is completed. (a prior assessment from environmental and veterinary national authorities on these items must be submitted). If applicable Environmental impact assessment shall be carried out prior to investment according to Law On Assessment of the impact on Environment (compliant with EU directives 85/337/EEC and 97/11/EC, including Annex I and II)

5.1.3. Holding meets the minimum national standards regarding the environment, veterinary, hygiene and animal welfare where applicable (see annex X).

5.1.4. Where acquis related minimum standards regarding the environment, hygiene and animal welfare have been newly introduced at the time the application is received, the decision to grant support will be conditional on the holding meeting these new standards by the end of the realisation of the investment;

5.1.5. Project involves activities, which are not already funded under other national measures and EU structural instruments;

5.1.6. Applicant has no deferred tax liabilities and keeps accounting records (according to Lithuanian legislation);

5.1.7. A condition for granting aid will be that applicant has professional skill and competence for engaging in the production line affected by the investment. As sufficient will be considered professional training in the field of agriculture or other training that is related in a view of engaging in the production affected by the investment. Aid may also be granted to an applicant that has at least three years' experience of farming;

5.1.8. Any operation shall remain eligible only if it does not within five years from the date of the authorization of the payment by the applicant country's paying agency undergo a substantial modification, a substantial modification shall be considered as affecting its nature or its implementation conditions or giving to a firm or public body an undue advantage; and resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change in location in a productive activity.

5.1.9. Applicants should demonstrate in the business (operational) plan economic vialibility of the agricultural holding at the end of the realisation of the project (see guidelines for evaluation of the economic viability of the beneficiary in annex XI).

5.1.10. For the projects, which have objective to increase in production volume, beneficiary shall provide sufficient evidence (i.e. contracts for sales) for normal market outlets.

5.1.11. Applicants who are implementing project supported under this measure are not eligible to apply three years from the date of project approval.

5.1.12. Eligible expenditure must originate in the Community or in the applicant countries in accordance with SAPARD Financial regulation. The same goes for supplies and equipment purchased by a contractor for works or services contracts if the supplies and the equipment are destined to become the property of the project once the contract is completed."

5.2 Specific for projects concerning the milk sector:

5.2.1. Production volume per holding is at least 50 tones of milk per year . Beneficiaries that start producing, in business plan shall demonstrate the fact that production volume per holding will be no less than 50 tones of milk per year at the end of the project;

5.2.2. There is only registered and controlled cattle in the holding;

5.2.3. Number of animals per hectare must not exceed 1,7 LU (including rented land)*;

5.3 Specific for projects concerning the meat sector:

5.3.1. There are at least 10 suckler cows or 30 heads of beef cattle (if investment concerns cattle meat sector), at least 50 sows (if investment concerns pig meat sector) and at least 50 sheep (if investment concerns sheep meat sector). Beneficiaries that start producing, in business plan shall demonstrate the fact there will be at least 10 suckler cows or 30 heads of beef cattle (if investment concerns cattle meat sector), at least 50 sows (if investment concerns pig meat sector) and at least 50 sheep (if investment concerns sheep meat sector).

5.3.2. There is only registered and controlled cattle in the holding;

5.3.3. Number of animals per hectare must not exceed 1,7 (including rented land);

6. Eligibility of investments according to priority sectors:

6.1. Eligibility of investments in milk and dairy sector:

6.1.1. Investments in construction and reconstruction of operational buildings;

6.1.2. Investments in milking and cooling equipment;

6.1.3. Investments in fodder preparation equipment and machinery;

6.1.4. Investments in silage handling equipment and machinery;

6.1.5. Investments in feeding equipment;

6.1.6.Investments in manure, slurry reservoirs and specialized transportation equipment;

6.1.7. Investments in machinery and equipment related to arrangement and maintenance of grazing and pasture areas.

6.2. Eligibility of investments in meat sector:

6.2.1. Investments in construction and reconstruction of operational buildings;

6.2.2. Investments in fodder preparation equipment  and machinery;

6.2.3. Investments in silage handling equipment and machinery;

6.2.4. Investments in feeding equipment;

6.2.5. Investments in manure, slurry reservoirs and specialized transportation equipment;

6.2.6.Investments in machinery and equipment related to arrangement and maintenance of grazing and pasture areas;

6.2.7. Investments in cages (applicable only for poultry sector);

6.3. Eligibility of investments in fruit and vegetable sector:

6.3.1. Investments in equipment and machinery related to setting of garden-plots and berry-fields;

6.3.2. Investments in harvesting equipment;

6.3.3. Investments in storage and freezing facilities and equipment;

6.3.4. Investments in handling and packaging equipment and machinery;

6.3.5. Investments in modernisation of green-houses;

6.3.6. Investments in special fruit and vegetable transportation equipment;

6.4. Eligibility of investments in grain sector:

6.4.1. Investments in grain drying and cleaning systems;

6.4.2. Investments in grain storage facilities;

6.4.3. Investments in harvesters;

6.5. Eligibility of investments in flax sector:

6.5.1. Investments in harvest reaping equipment and machinery;

6.5.2. Investments in flax seeds bed (galvenu) drying system;

7. Priority criteria

8. Eligible expenditure:

8.1. New agriculture machinery and equipment including computer software;

8.2. New construction materials;

8.3. Construction/ reconstrction costs based on contracts with third parties; 

8.4.General costs, such as architects’, engineers’, and Consultants’ fees, feasibility studies, patents and licences, in addition to expenditure as referred to in 8.1, 8.2 and 8.3up to a ceiling of 12% of that expenditure;

8.5. Eligible costs are determined excluding VAT.

9. Ineligible expenditure:

9.1. Expenditure for purchasing of land and existing buildings;

9.2. VAT is recoverable by the beneficiary and is not eligible for compensation;

9.3. Purchase of second-hand machinery and equipment;

9.4. Maintenance costs;

9.5. Operating costs;

9.6. The costs of any items costing more than the 10 000 euro for which the beneficiary has not obtained quotations from at least two suppliers, the originals of these being included in the aid request;

9.7. Purchase of vehicles, except highly specialised vehicles necessary for transporting the basic agricultural products;

9.8. Purchase of material, which is normally written off within a year;

9.9. Hire purchase of equipment for production operations is excluded unless the arrangement provides that the applicant will become the owner of the equipment within the period of project implementation or within 3 years. In such cases only the costs relating to the actual acquisition or to the actual value of the transaction, excluding interest and other expenses, can be taken into consideration for aid. Payments will be made only when an applicant becomes owner of the equipment.

9.10. Bank charges, costs of guarantees and similar charges;

10. Final beneficiaries:

Farmers, agricultural companies and enterprises registered in accordance with the procedure established by the Laws of the Republic of Lithuania, which are producing agricultural goods and which are responsible for financing the investment in the holding.

11. Aid level

The amount of public aid is 45% of the total eligible expenditure.

For newly established young farmers (under age of 40 years), for farmers that are engaged in organic farming or farmers from the Less Favoured Areas (LFA) (land value point is below 32) grant aid is 50%.

Amount of public aid must not exceed 375 000 EURO of the total eligible expenditure.

14. Financial provisions, (indicative, million EURO)

15. Allocation of funds (public expenditure) among sectors per year (indicative figures, million EURO)

16. Progress indicators:

The SAPARD Agency will organise supervision over the indicators for implementation of this specific measure. Program implementation authority will submit any information relevant to the program Monitoring Committee. In case as the result of SAPARD-program implementation considerable increase in production capacities will be noted in sectors sensitive for European Union, the Monitoring Committee will make suggestions for corresponding program modifications.

18. Administration procedures

All applicants must submit application forms, correctly filled in, and business plans to their local agricultural divisions, where the initial checks of applications and review of the business plans will be performed. After the initial screening of the documents, all the relevant material, submitted by an applicant, will be passed to the National Paying Agency under the MoA, where the final decision on granting aid will be made. Detailed administrative procedures are presented in chapter 8 “Administration and conditions of implementation” under point 8.2.2.

Measure 2: Improving the Processing and Marketing of Agricultural and Fishery Products

1. Introduction

The measure is part of the rural development programme and is to be co-financed by EU (SAPARD).

The measure aims to improve the processing and marketing conditions for agricultural and fishery products in order to fulfil the EU requirements (hygiene, food safety, quality, environment, animal welfare etc.) and to contribute to implementation of the NPAA.

The measure has also to add extra value to the products for the benefit of farmers and the industry and has to improve the productivity and competitiveness on internal and external market.

During the last decade, as all areas of economy, food industry has experienced reforms: around 90 per cent of assets have become private. Along with privatisation, food industry restructurisation was taking place. However, there is still part of enterprises, especially in meat sector, which use obsolete technologies and which are an obstacle to implement EU standards and requirements on food safety, hygiene, sanitary and environmental protection.

Significant progress has been made in dairy industry. Currently there are 57 milk processing enterprises, 30 of them are small dairies producing for domestic market. All milk processing enterprises are private. Now there are 5 dominant dairies, which purchase and process around 80 per cent of raw milk. 17 dairies are assigned veterinary control numbers, approved by European Commission, this allows them to export production to the EU countries. Modern dairies are concerned about increased quality of raw milk and they give investment support to their suppliers. Cheese production is probably the most developed branch of dairy industry. However, whey, as a side product of cheese production, is poorly utilised and it causes environmental pollution. It is foreseen to allocate SAPARD support for the 5 biggest cheese producing enterprises, so that they would acquire whey processing technologies, thus solving envirnmental problems caused by dairies. Insignificant amount of funds will be allocated for modernisation of dairies as well. In the year 2006, there should operate about 30-35 dairies.

Meat industry is the most backward one. Despite the fact that this industry faces quite fast restructurisation (since 1997 till the middle of 2000 number of meat processing enterprises has decreased from 706 to 485 or by 32,3 per cent), there are still too many enterprises which efficiently do not utilise capacities, do not generate profit and are not able to allocate funds for reorganisation of production. Their production is quite expensive while marketability is low. Because of economic reasons and inability to comply to veterinary requirements number of enterprises is rapidly decreasing; such tenencies will prevail during the next 3-4 years as well. In July 2000 there were 170 slaughterhouses, 145 slaughterhouses which process as well and 154 meat processing enterprises.

Majority of enterprises have essential technical defficiencies such as facilities’ layout, walls’, floor’ defects, corosion of metal constructions, ineffctive ventilation and freezing system, poor waste treatment, etc., as well as basic defficiencies (territorial, transportation, implementation of HACCP), which require substantial amount of funds. Taking into account actual economic-financial situation of those enterprises, it is evident that they are not able to implement EU hygiene, sanitary and environmentl requirments. Besides, it has been calculated that modernisation of such slaughterhouses would be more costly than construction of the new ones.

At the same time, there are many companies of low meat processing capacities which already have modern technologies, so the main problem is slaughtering. According to Meat sector strategy 2000-2006, there are foreseen regions where in accordance to number of animals new slaughterhouses would be necessary in order to supply modern processing companies with meat. Strategy defines timing of new constructions with respect to actual regional situation. Capacity of new slaughterhouses would be 65-70 per cent in relation to the current number of animals. The rest should be slaughtered in low capaity slaughterhouses, reorgaized by private funds.

There are two rendering plants in Lithuania, both financed from the budget. Production is being sold, but in 1999 the enterprises operated at loss because of high costs of production. It is foreseen to allocate some of SAPARD funds to modernisation of one of the enterprises.

There registered 114 fish processing enterprises, 89 of them are operating and 8 are fishing vessels. 7 fish processing enterprises and all the fishing vessels are assigned veterinary control numbers, approved by European Commission, this allows them to export production to the EU countries. However, about one third of enterprises will not be able to comply to the requirements till the date of accession to the EU. Majority of enterprises have essential technical defficiencies such as facilities’ layout, old equipment, etc., as well as basic defficiencies (territorial, transportation, implementation of HACCP), which require substantial amount of funds. Therefore, SAPARD funds will be allocated to modernize the enterprises and upgrade their level.

Grain processing is concentrated in 20 processing enterprises, which produce 60-70 per cent of all the grain products. The rest is processed in individual farms, agricultural enterprises, and private an cooperated mills.

Production capacities of processin enterprises are: 410 thous. tones of flour, 60 thous. tones of groats and 2,5 mln. tones of combined fodder and additives.

In Lithuania there are 16 enterprises which can produce combined fodder, but only 6 are continuously operating. They have 80 per cent of the market, the rest is produced by small rocessors.

Currently food flour mills’ capacity is utilised by 50 per cent and combined fodder – 20 per cent.

According to Crop cultivation and grain processing strategy 2000-2006,  main investment support shall be directed to acquisition of grain drying and cleaning equipment, construction and renovation of storage facilities according to the EU hygiene requirements, implementation of new processing technologies. It is foreseen to invest into processing of grain and rape for technical purposes (production of biofuel).

In a perspective of ingration into EU grain and fodder quality determination system, in it planned to invest into grain quality evaluation equipment.

Flax cultivation is one of the Lithuanian traditional agricultural activities. Flax is grown in the defined areas. In 2000 flax fibre was purchased and processed by 9 primary flax  processing enterprises, which mainly use obsolete technologies and thus quality of fibre decreases. Primary flax processing enterprises would have the capacity to process 60 thous. Tones per year after their modernisation and technological renovation. The national Flax sector development strategy defines regions, in which the enterprises should be modernised, and modernisation will be supported from SAPARD.

Curently in Lithuania there are 20 fruit and vegetables processing enterprises. 13 of them have small and 7 have big enterprise’ status. Only 5 from the big enterprises operate profitably. There are developing small companies which process or freeze small quantities of  vegetables or berries. In Lithuania there are industrially processed only 5-7 per cent of all the cultivated fruit and vegetables. Mostly are produced concentrated apple juice, potatoe products, cucumbers and mushrooms. Except for the concentrated juice industry, there are basically employed obsolete technologies and equipment in the conserve industry. At the same time, capacities allow to process up to 80 thous. tones of fruit and berries.

There are 8 vegetables and 16 fruit and berries producers’ cooperatives, however, the main market suppliers are still individual farms.

The essential difference between the EU and Lithuanian support schemes is that support is given to to individual producers and not their organisations in Lithuania. There should be about 5-6 producers organisations, which would comply to the EU requirements. 

2. Linkage to other measures

Implementation of this measure will complement the implementation of measure1: “Investments in agricultural holdings”, because efficient production of high quality raw materials on the primary level has to be followed by rational and efficient processing, which results in higher quality and higher added value finished goods. Equally, economically stronger processing enterprises must develop stable relations with primary agricultural producers and such relations must result in economic benefits to both sides.

3. Objectives

5.1. Reorganisation of production in order to implement EU requirements on food safety, hygiene, veterinary, environmental protection and other issues in the agricultural and fishery production processing sectors;

5.2. Modernisation of agricultural and fishery processing companies, including modernisation of processing facilities as such in fishing vessels which carry-out an initial preparation and processing, in order to achieve higher efficiency of production;

5.3. Improvement of quality of agricultural and fishery produce, and of quality management in the whole process of production and subsequent increase of competitiveness of the processing companies;

5.4. Restructuring of the agricultural and fishery processing enterprises, not increasing production volumes and capacities of a given sector;

5.5. Establishment and improvement of the marketing chain, improvement of product pre-sale preparation and introduction to market;

5.6. Development of production of higher-valued, biologically valuable, ecologically certified and marketable products;

5.7. Improvement of working conditions, reduction of environmental pollution, caused by the agricultural and fishery production processing companies, processing of by-products and waste, establishment of rendering system.

4. Priority sectors

Based on the analysis of the Lithuanian food processing industry (presented in General description of the region under points 1.1.12 – 1.1.17 and in Eligible measures under point 4.2 of the Agriculture and Rural Development Plan 2000 - 2006), Lithuanian authorities have agreed within the framework of the SAPARD programme to grant aid to the following sectors:

Sector 1 – Milk and dairy

Sector 2 – Meat (beef, poultry and pork)

Sector 3 – Fishery

Sector 4 – Fruit and vegetable

Sector 5 – Crops: grain, flax

5. Eligibility criteria:

5.1. Application is submitted by an applicant, eligible for support under the SAPARD programme (see definition of the final beneficiary);

5.2. Investment proposed concerns products (both raw material and output) listed in Annex I to the Treaty and originate from the EU or applicant countries, however, this will not be applied to fisheries sector;

5.3. Investment proposed does not involve production of butter or skimmed milk powder;

5.4. Investment proposed should lead to certificate of compliance with EU requirements onveterinary, hygiene, sanitary, food quality, animal welfare and environmentally .(a prior assessment from the environmental and veterinary national authorities on these items must be submitted). If applicable Environmental impact assessment shall be carried out prior to investment according to Law On Assessment of the impact on Environment (compliant with EU directives 85/337/EEC and 97/11/EC, including Annex I and II)5.5. Investments implemented in fisheries sector must be in compliance with the FIFG implementing regulation R2792/1999(a prior assessment from the national fishery authorities must be submitted);

5.6. Enterprise meets the minimum national standards regarding the environment (see annex X), hygiene, veterinary and animal welfare.

5.7. Project involves activities, which are not already funded under other national measures and EU structural instruments;

5.8. Applicant has no deferred tax liabilities and keeps accounting records (according to Lithuanian legislation);

5.9. Any operation shall remain eligible only if it does not within five years from the date of the authorisation of the payment by the applicant country's paying agency undergo a substantial modification, a substantial modification shall be considered as affecting its nature or its implementation conditions or giving to a firm or public body an undue advantage; and resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change in location in a productive activity.

5.10. Applicants should demonstrate in the business (operational) plan economic vialibility of the enterprise at the end of the realisation of the project (see guidelines for evaluation of the economic viability of the beneficiary in annex XI)

5.11. For the projects, which has objective to increase in production volume shall provide sufficient evidence (i.e. contracts for sales) for normal market outlets.

5.12. Applicants who are implementing project supported under this measure are not eligible to apply three years from the date of project approval.

6. Eligibility of investments according to priority sectors:

6.1. Eligibility of investments into milk and dairy sector:

6.1.1. Investments concerning environmental protection (treatment of wastewater from cheese production);

6.1.2. Investments in modernization of dairy enterprises.

6.2. Eligibility of investments in meat sector:

6.2.1. Investments in establishment and modernisation of slaughterhouses for cattle/pigs and poultry and meat processing enterprises with primary intention to meet the EU requirements (including classification and quality determination in accordance with EU standards, application of hygiene, sanitation and food safety standards, etc.);

6.2.2. Investments in rendering plants;

6.3. Eligibility of investment in fishery sector:

6.3.1. Investment in improvement of fish landing and market infrastructure (e.g. establishment of one fishery auction hall);

6.3.2. Investment in construction, reconstruction and modernisation of processing facilities (including those in fishing vessels) which carry-out an initial preparation and processing in order to meet the EU requirements or implement modern control and quality systems (e.g. ISO 9000 or HACCP).

6.4. Eligibility of investment in fruit and vegetable sector:

6.4.1. Investments in modernisation of fruit and vegetable processing and packing equipment;

6.5. Eligibility of investment in grain sector:

6.5.1. Investment in laboratory equipment aimed at testing the quality of raw material and production quality control.

6.6. Eligibility of investment in fibber flax sector:

6.6.1. Modernisation of primary fibber flax treatment lines.

7. Priority criteria

8. Eligible expenditure:

8.1. New machinery and equipment including computer software;

8.2. New construction materials;

8.3. Construction/reconstruction cost based on contracts with third parties;

8.4.General costs, such as architects’, engineers’, and Consultants’ fees, feasibility studies, patents and licences, in addition to expenditure as referred to in 8.1, 8.2 and 8.3 up to a ceiling of 12% of that expenditure;

8.5. Eligible costs are determined excluding VAT.

8.6. Eligible expenditure must originate in the Community or in the applicant countries in accordance with SAPARD Financial regulation. The same goes for supplies and equipment purchased by a contractor for works or services contracts if the supplies and the equipment are destined to become the property of the project once the contract is completed."

9. Ineligible expenditure:

9.1. Investments at retail level;

9.2. Expenditure for purchasing of land and existing buildings;

9.3. VAT is recoverable by the beneficiary and is not eligible for compensation;

9.4. Purchase of second-hand machinery and equipment;

9.5. Maintenance costs;

9.6. Operating costs;

9.7. The costs of any items costing more than the 10 000 euros for which the beneficiary has not obtained quotations from at least two suppliers, the originals of these being included in the aid request;

9.8. Purchase of vehicles, except highly specialised vehicles necessary for transporting the basic agricultural products;

9.9. Purchase of material, which is normally written off within a year;

9.10. Hire purchase of equipment for production operations is excluded unless the arrangement provides that the applicant will become the owner of the equipment within the period of project implementation or within 3 years. In such cases only the costs relating to the actual acquisition or to the actual value of the transaction, excluding interest and other expenses, can be taken into consideration for aid. Payments will be made only when an applicant becomes owner of the equipment.

9.11.Bank charges, costs of guarantees and similar charges;

9.12.Landscaping, other embellishment works and recreational equipment costs are ineligible;

9.13.Acquisition of intangible property (except patents, licenses) and operational costs are ineligible, except insurance of constructions;

9.14.Expenditure on promotion or publicity, research or demonstration is not eligible.

10. Final beneficiaries

 Agricultural and other entities engaged in the processing of agricultural and fishery products ultimately responsible for financing the investment in enterprises.

13. Aid level

The amount of public aid is 45% but not more than 5 million. EURO of the total eligible expenditure.

14. Financial provisions (indicative, million EURO)

15. Allocation of funds (public expenditure) among sectors per year (indicative figures)

(million EURO)

16. Progress indicators:

The SAPARD Agency will organise supervision over the indicators for implementation of this specific measure. Program implementation authority will submit any information relevant to the program Monitoring Committee. In case as the result of SAPARD-program implementation considerable increase in production capacities will be noted in sectors sensitive for European Union, the Monitoring Committee will make suggestions for corresponding program modifications.

17.  Administration procedures

Applications and other required documentation must be submitted to the SAPARD division, responsible for administration of this measure, at the National Paying Agency under the MoA. Detailed administrative procedures are presented in chapter 8 “Administration and conditions of implementation” under point 8.2.2.

Measure 3: Development and diversification of economic activities providing for multiple activities and alternative income

1. Introduction

The measure is part of the rural development programme and is to be co-financed by EU (SAPARD).

It is focused on rural development based on non-traditional agricultural and non-agricultural activities and services so as to reverse the trend towards economic and social decline of the countryside. The aim is to create favourable conditions for diversification of activities and to create possibilities for rural inhabitants to earn additional income and to achieve better living and working standards.

2. Linkage to other measures:

This measure, being additional to measure 1: “Investments in agricultural holdings”, will contribute to balanced economic development, by providing favourable conditions to farm diversification and alternative activities in those areas, where investments in traditional farming would be economically unjustifiable.

3. Objectives

3.1. Increase the level of income of rural inhabitants and farmers;

3.2. Maintain present employment and create new or alternative jobs;

3.3. Encourage diversification of rural activities and services, co-operation of activities and development of small and medium businesses;

3.4. Provide more tourist accommodation facilities;

3.5. Increase the volume of services for rural inhabitants and improve the quality of the services provided.

4. Priority sectors

Based on the analysis of the Lithuanian rural economy, Lithuanian authorities have agreed within the framework of the SAPARD programme to grant aid to the following activity sectors:

Sector 1 - Non-traditional agricultural products;

Sector 2 – Rural tourism and recreation;

Sector 3 – Aquaculture and fishing in inland waters;

Sector 4 – Basic services and other activities, promoting income for the rural population;

Sector 5 – Traditional craft activities;

5. Eligibility criteria

5.1. Application is submitted by an applicant eligible for support under the SAPARD programme (see definition of the final beneficiary);

5.2. Project implementation location is in rural areas;

5.3. Number of beds does not exceed 18 after implementation of investment into rural tourism and recreational activities sector;

5.4. Project assures compliance with Community standards regarding hygiene, veterinary, sanitary, food quality, animal welfare and environmental when its implementation is completed. (a prior assessment from environmental and veterinary national authorities on these items must be submitted). If applicable Environmental impact assessment shall be carried out prior to investment according to Law On Assessment of the impact on Environment (compliant with EU directives 85/337/EEC and 97/11/EC, including Annex I and II)

5.5. Project involves activities, which are not already funded under other national measures and EU structural instruments;

5.6. Applicant has no deferred tax liabilities and keeps accounting records (according to Lithuanian legislation);

5.7. Any operation shall remain eligible only if it does not within five years from the date of the authorization of the payment by the applicant country's paying agency undergo a substantial modification, a substantial modification shall be considered as affecting its nature or its implementation conditions or giving to a firm or public body an undue advantage; and resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change in location in a productive activity.

5.8. Applicants should demonstrate in the business (operational) plan economic vialibility of the agricultural holding at the end of the realization of the project (see gidelines for evaluation of the economic viability of the beneficiary in annex XI).

5.9. Applicants who are implementing project supported under this measure are not eligible to apply three years from the date of project approval.

6. Eligibility of investments according to priority sectors:

6.1. Eligibility of investments in non-traditional agricultural products (medical and spice herbs, mushrooms, snails, earthworms, ostriches, breeding of fur bearing animals, preparation of biofuel, etc.)

6.1.1. Investments into specialised operational equipment;

6.1.2. Investments in construction, reconstruction of operational facilities and buildings.

6.2. Eligibility of investments in rural tourism and recreational activities

6.2.1. Investments in setting of tourist rooms and recreational zones;

6.2.2. Investments in modernisation of the existing tourist facilities;

6.2.3. Investments in equipment for recreational activities;

6.2.4. Investments in facilities and equipment for the development of leisure fishing, hunting and horse riding;

6.2.5. Investments in development of tourist catering.  

6.3. Eligibility of investments into aquaculture and fishing in inland waters

6.3.1. Investments in construction, reconstruction and setting of incubation shops and reservoirs;

6.3.2. Investments in modernisation of water-pumps

6.4. Basic services for the rural economy and population

6.4.1. Investments in special operational equipment, workshops and service stations related to agriculture (workshops and service stations for agriculture,.)

6.4.2. Investments in special operational facilities and equipment (hairdressing saloons, dress-making shops, shoes or clothes repair services, production of non-agricultural products etc);

6.5. Traditional craft activities

6.5.1. Investments in facilities and equipment in weaving, tying of dried flowers and other plants;

6.5.2. Investments in facilities and equipment in woodwork, ceramics, smith or other handicraft workshops;

6.5.3. Investments in establishment of handicraft sales and demonstration facilities. 

7. Priority criteria:

8. Eligible expenditure:

8.1. New machinery and equipment including computer software;

8.2. New construction materials;

8.3. Costs of construction and or/renovation of operational buildings and aquaculture plants based on contracts with third parties; 

8.4. General costs, such as architects’, engineers’, and consultants’ fees, feasibility studies, patents and licences in addition to expenditure as referred to in 8.1, 8.2 and 8.3 may be covered at a rate of up to 12 per cent of the total eligible expenditure.

8.5. Eligible costs are determined exclusive of VAT.

8.6. Eligible expenditure must originate in the Community or in the applicant countries in accordance with SAPARD Financial regulation. The same goes for supplies and equipment purchased by a contractor for works or services contracts if the supplies and the equipment are destined to become the property of the project once the contract is completed.

9. Ineligible expenditure:

9.1. Expenditure for purchasing of land and existing buildings;

9.2. VAT is recoverable by the beneficiary and is not eligible for compensation;

9.3. Purchase of second-hand machinery and equipment;

9.4.Maintenance costs;

9.5.Operating costs;

9.6.The costs of any items costing more than the 10 000 euros for which the beneficiary has not obtained quotations from at least two suppliers, the originals of these being included in the aid request;

9.7.Purchase of vehicles, except highly specialised vehicles (e.g. bicycles, canoes) which can only be used for approved use. In such case applicant must establish that vehicles for which aid is sought are necessary;

9.8.Purchase of material, which is normally written off within a year;

9.9.Hire purchase of equipment for production operations is excluded unless the arrangement provides that the applicant will become the owner of the equipment within the period of project implementation or within 3 years. In such cases only the costs relating to the actual acquisition or to the actual value of the transaction, excluding interest and other expenses, can be taken into consideration for aid. Payments will be made only when an applicant becomes owner of the equipment.

9.10.        Bank charges, costs of guarantees and similar charges;

9.11.        Acquisition of intangible property (except patents, licenses) and operational costs are ineligible, except insurance of constructions;

9.12.        Expenditure on promotion or publicity, research or demonstration is not eligible.

10. Final beneficiaries:

Farmer and private legal entities, registered in rural areas in accordance with the procedure established by the Laws of the Republic of Lithuania and ultimately responsible for operation and at the time of application employed not more than 50 employees.

13. Aid level

The amount of public aid is 50 % but not more than 350 000 EURO of the total eligible expenditure.

14. Financial provisions (indicative, million EURO)

Indicative financial allocation of public funding (in per cent of total public funding of the measure)

15. Progress indicators

16. Application administration

All applicants must submit the application forms filled in correctly and business plans to their local agricultural divisions, where the initial checks of applications and review of the business plans will be performed. After the initial screening of the documents, all the relevant material, submitted by a potential applicant, will be passed to the National Paying Agency, where the final decision on granting aid will be made. Detailed administrative procedures are presented in chapter 8 “Administration and conditions of implementation” under point 8.2.2.

Measure 4: Improvement of rural infrastructure

1. Introduction:

The measure is a part of the rural development programme and is to be co-financed by EU (SAPARD).

Under this measure there will be provided assistance to the permanent village dwellers, subjects of agriculture and juridical bodies preparing and carrying out for them non – revenue investment projects associated with the improvement of rural infrastructure and development of the other social and engineering infrastructure.

Priority will be provided for the projects aimed at creation of more favourable conditions for economic, social and cultural life, villages with rural tourism potential and those with a particularly poor infrastructure.

This measure complies with CAP objectives, such as: vibrant rural communities generating employment and opportunities, simple, transparent decision – making process, clear connection between input to agriculture (support) and output (benefits to society).

2. Linkage to other measures

Implementation of this measure will complement the implementation of measure “Investments in agricultural holdings” and “Development and diversification of economic activities, providing for multiple activities and alternative income”, because existence of the basic infrastructure is an ultimate pre-requisite for other human activities. Therefore, less developed rural social and technical infrastructure hinders development of better living and working conditions. Although from the Rural Support Fund activities it can be observed that volume of investments into infrastructure is declining, from analysis of disparities between rural and urban areas it can be seen that quite large disparities still exist and reduction of these gaps requires substantial investment.

3. Objectives:

3.1. Improve rural conditions of life and work;

3.2. Improve the equipment state infrastructure;

3.3. Create the appropriate conditions for economic and social activities;

4. Priority sectors

Based on the analysis of Lithuanian agricultural production, Lithuanian authorities have agreed within the framework of the SAPARD programme to grant aid to the following sectors:

Sector 1- Communications and engineering equipment (roads, electricity)

Sector 2- Water management system

5. Eligibility criteria

5.1. Application is submitted by an applicant eligible for support under the SAPARD programme (see definition of the final beneficiary);

5.2. Project implementation location is in rural areas;

5.3. Project assures compliance with Community standards regarding environment when its implementation is completed. (a prior assessment from environmental national authorities on these items must be submitted). If applicable Environmental impact assessment shall be carried out prior to investment according to Law On Assessment of the impact on Environment (compliant with EU directives 85/337/EEC and 97/11/EC, including Annex I and II)

5.4. Project involves activities, which are not already funded under other national measures and EU structural instruments;

5.5. Applicant has no deferred tax liabilities;

5.6. Any operation shall remain eligible only if it does not within five years from the date of the authorization of the payment by the applicant country's paying agency undergo a substantial modification, a substantial modification shall be considered as affecting its nature or its implementation conditions or giving to a firm or public body an undue advantage; and resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change in location in a productive activity

6. Eligibility of investments according to priority sectors:

6.1. Eligibility of investments in communications and engineering equipment

6.1.1. Investments in complete establishment of electricity lines from general line to farm (e.g. establishment of pillars, wiring, cables etc.);

6.1.2. Investments in complete establishment of roads for private usage (e.g. sawing out of gutter; sawing out of laminar filtration; strew on of road metal, equipment of kerb; equipment of the upper road pavement etc.).

6.2. Eligibility of investments in water management system

6.2.1. Investments in renovation of polders (according to National strategy for polder renovation), (e.g. modernisation of the polder pumping stations; repairing of the protective embankments, repairing of the water indraft ditches etc.);

6.2.2. Investments in water supply and sewerage system, construction and reconstruction of cleaning equipment (e.g. installation and modernisation of water-supply systems; construction and modernisation of water treatment plants etc);

6.2.3. Investments in setting of artesian bores (e.g. installation and modernisation of artesian wells).

7. Priority criteria

Investments in communications and engineering equipment

Investments in renovation of polders:

Investments in water supply and sewerage system, setting of artesian bores

8. Eligible expenditure

8.1. New machinery and equipment;

8.2. New construction materials;

8.3. Costs of construction / reconstruction based on contracts with third parties;

8.4. General costs, such as architects’, engineers’, and consultants’ fees, feasibility studies, patents and licences, in addition to expenditure as referred to in 8.1, 8.2 and 8.3 may be covered at a rate of up to 12 per cent of the total eligible expenditure.

8.5. Eligible costs are determined exclusive of VAT.

8.6. Eligible ex