“Protection” of Ukrainian domestic industries, feed-in tariff, and bill revocations: parliamentary agenda for the special plenary meeting

The third parliamentary session has already been closed, but MPs decided to hold a special plenary meeting today, on July 21, to address the following issues: changes to public procurement procedure, lower feed-in tariff, shadow market of scrap metal, and taxation for sole proprietors.

Status: awaits the first reading, MPs can substantially revise it.

Who is affected: Ukrainian citizens, Ukrainian and foreign business, government bodies, local government, and the Cabinet.

What does it change:

• localization level — a percentage of raw materials, components, parts, and services provided by domestic manufacturers and suppliers — will be added as a qualification criterion for public procurements
• minimum level of localization will be mandatory for procuring some types of goods and services until January 1, 2031: 25 to 40% (depending on the type) in 2021-2023, 40 to 60% in 2024-2031
• localization level will be calculated by a designated body according to a methodology approved by the Cabinet.

What is wrong:

• there is no clearly defined methodology to calculate a localization level in the bill. Thus, in practice new requirements could be used for the benefit of some business groups, and instead of protecting domestic industries the law will facilitate corruption and abuse of power
• the bill could conflict with international obligations of Ukraine under the Ukraine-European Union Association Agreement. Domestic legislation has to comply with obligations under international agreements
• according to estimates by Kyiv School of Economics, the Government budget will loose from $591 to 642 mln if the bill is passed
• according to the investigative journalists from Our Money (Наші гроші), the Ambassador of the European Union to Ukraine Matti Maasikas allegedly criticized restrictions proposed by the bill, because they undermine basic principles of equal treatment and non-discrimination, denies foreign business a possibility to participate in public procurements, and thus are incompatible with the Association Agreement.

Status: passed the first reading, MPs can adopt it in the second reading.

Who is affected: Ukrainian citizens, business, renewable energy investors, and the Cabinet.

What does it change:

• the feed-in tariff will be lowered, feed-in tariff ceiling will be set for renewable energy providers
• some of the public procurement procedures for renewable energy will be enhanced
• the state will guarantee not to make any further legislative changes

Why this is important: according to the Prime Minister Denys Shmygal, feed-in tariff price in Ukraine is the highest among European countries and the Government cannot afford to pay it. Renewable energy expert Andrii Zinchenko claims that official calculations are incorrect, because they do not take into account European Feed-in-Premium prices. He also warns that the bill will drive away investments into Ukrainian renewable energy.

What is right: according to explanatory note, the bill will lower the feed-in tariff and thus reduce state company Guaranteed Buyer’s budget deficit.

What is wrong:

• the bill was introduced, because the Government had stopped paying the suppliers. Now it pays only 5% of the expected amount, and that is not enough to make ‘green’ power plants a profitable enterprise. As a compromise, the Cabinet has signed a memorandum with several representatives of the renewable energy market and tries to lower the prices
• most of the energy on ‘green’ market is provided by small producers, but they are disadvantaged by the bill. Lesser power plants will not be competitive on the market
• a number of international organizations expressed their concerns about changes in the renewable sector, including EBRD, American Chamber of Commerce in Ukraine, European Business Association, and CEO Club.

Status: the bills have already been adopted, but the Parliament can vote to revoke them.

Who is affected: sole proprietors, owners and employees of metal manufacturing companies, Ukrainian citizens, and MPs.

What does it change: the Parliament will vote on revocation of two bills:

• On fighting the shadow market of metallurgical raw materials and scrap metal
• On online taxpayer cabinet and removal of some of the restrictions on sole proprietors

Both revocation resolutions were submitted by Anton Poliakov (group For the Future).

Why this is important: revocation resolutions almost never get enough votes, but opposition use them to delay implementation of some laws.