Ministry of Agriculture Did Not Submit Support Measures for Wood Processors to Finance Ministry for Evaluation

The Latvian Ministry of Finance (FM) has raised concerns regarding the Ministry of Agriculture's (ZM) handling of support measures for the wood industry, particularly concerning state aid regulations. According to the FM, the ZM, despite being the responsible institution, failed to submit its own assessment of these measures to the FM for official evaluation as required by the Commercial Aid Control Law.

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The Ministry of Finance points out that ZM officials have confirmed to the service inspection commission that the issue was also evaluated from the aspect of state aid, moreover, in consultation with ZM's own experts on state aid issues, which once again confirms that the evaluation was carried out within the sectoral ministry.

Instead, the ZM conducted its internal assessment and concluded that the proposed support did not constitute state aid. This internal determination meant the measures were not forwarded to the FM for the initial evaluation. However, the FM emphasizes that ZM officials had previously indicated to a service inspection commission that the matter had been reviewed from a state aid perspective, even consulting with ZM's own state aid experts. This internal review, the FM notes, places the responsibility for the legal assessment squarely on the Ministry of Agriculture.

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Despite this, in February this year, the FM invited the ZM to obtain an independent expert's assessment of the pricing mechanism included in the information reports for compliance with market prices and, in case of doubt, proposed that the ZM contact the European Commission (EC) for legal certainty regarding whether the implemented pricing mechanism does not provide economic advantage and thus the measure does not qualify as state aid.

The FM's apprehension is further amplified by the fact that the ZM has reportedly not sought an independent expert's opinion on the pricing mechanism's compliance with market prices, nor has it requested clarification from the European Commission (EC) on whether the mechanism constitutes state aid. This is particularly concerning given that the EC initiated an assessment of the pricing mechanism in 2021 following a complaint from market participants regarding potential illegal state aid to companies like SIA "Pata", SIA "Pata Board", AS "Pata Saldus", and AS "Pata Strenči". The FM urges the ZM to provide its views and responses to the EC, as the ministry is responsible for communication with the EC in this ongoing matter.

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According to the information available to the FM, the ZM has not prepared the mentioned assessment, nor has the ZM asked the FM to contact the EC to obtain a decision.