Explanatory Memorandum to COM(2006)241 - Rules for voluntary modulation of direct payments provided for in Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers

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dossier COM(2006)241 - Rules for voluntary modulation of direct payments provided for in Regulation (EC) No 1782/2003 establishing common rules for ...
source COM(2006)241 EN
date 24-05-2006
1. The European Council in its December 2005 agreement on the financial framework for 2007–2013 introduced the possibility for Member States to “modulate” or reduce market expenditure and direct payments which accrue under the first pillar of the CAP up to a maximum of 20% and to use the amounts thus generated for their rural development programmes (second pillar of the CAP). It invited the Council, on the basis of a Commission proposal, to establish the modalities governing the transfers from the first pillar and stipulated that the additional Community funding for rural development would neither be subject to national co-financing nor to the minimum spending per axes rules as set out in the rural development regulation.

2. Since the amounts corresponding to voluntary modulation should not be considered as part of the maximum amounts constituting the annual ceiling for EAGF expenditure and since the possibility to adopt detailed rules concerning in particular voluntary modulation should be provided, Council Regulation (EC) No 1290/2005 should be amended accordingly.

3. The present legislative proposal for a Council Regulation laying down rules for voluntary modulation of direct payments pursuant to Council Regulation (EC) No 1782/2003 and amending Regulation (EC) No 1290/2005 on the financing of the common agricultural policy sets out how Member States can apply voluntary modulation and how the money can be used for rural development.

4. A first important principle will be that the money will transit through the Community budget, i.e. a reduction in commitment appropriations for first pillar expenditure with an equivalent increase in commitment appropriations for rural development.

5. CAP market expenditure (e.g. intervention, export refunds, private storage aids, etc.) does not lend itself to modulation. It supports the market as a whole, cannot be clearly attributed to a particular Member State and fluctuates over time. Also when market interventions are needed, it makes little economic sense to pay for example only 90% of the export refund. For these reasons CAP expenditure other than direct payments should de excluded from voluntary modulation.

6. Voluntary modulation should be aligned as much as possible on the provisions for compulsory modulation, i.e. apply to the same base of direct payments. A franchise of the first € 5 000 of direct payment would also apply to such additional reduction as in the case of compulsory modulation, involving an additional amount of aid to be returned to the farmers, within ceilings per Member State applying voluntary modulation to be fixed by the Commission. Member States would communicate to the Commission the rate of voluntary modulation they wish to apply (up to a maximum of 20%) for the period 2007–2012 (calendar years for direct payments).

7. Member States applying voluntary modulation would receive the corresponding amounts as a second source of Community funding for their rural development programmes, to which all rural development rules would apply with possible exception of co-financing [Article 70 i of Council Regulation (EC) No 1698/2005] as well as the pre-financing arrangements for EARDF [Article 25 of Regulation (EC) No 1290/2005]. However, Article 17 of Regulation (EC) No 1698/2005 (minimum spending rates per axis) should also apply to the amounts available from voluntary modulation for the purpose of ensuring compliance with the basic rules governing the commonly agreed policy. Released funds would be used within the mainstream rural development programmes (not in separate smaller programmes fed by voluntary modulation only) to allow management of programmes by the same management authorities and paying agencies.

8. Finally, the Commission would be empowered to adopt implementing rules for integrating voluntary modulation in rural development programming and for its financial management.