“Smart” Barns Require “Smart” Calculations

In 2019, Armenia’s government launched the “State Assistance for the Construction or Restoration of Small and Medium ‘Smart’ Barns and Their Technological Provision” program with the goal of increasing livestock productivity and milk production. The program was approved through a Government Decision on April 15 of the same year.

The government projected that the introduction of the latest technologies would foster the creation of favorable conditions to improve livestock care, leading to a rise in milk production and productivity indicators.

It was foreseen that by January 2022, 230 “smart” barns would be created in the regions of Armenia as a result of the project’s implementation, and the annual milk production of one cow was projected to virtually double from 2260 kg to 3500–4000 kg.

Why Create “Smart” Barns?

There are approximately 170,000 farms in Armenia that are involved in cattle breeding, with each farm having on average three large ruminants. The essential hygienic conditions for animals are typically not observed in these farms, instead traditional methods of livestock care and feeding are employed. Even animals with superior genetic characteristics cannot have high indicators in unfavorable circumstances.

Compared to other countries, milk productivity of cows in Armenia is low. According to international indicators, a single cow in Israel produces roughly 12,000 kg of milk annually, compared to 10,000 kg in the U.S.; 9,101 kg in Germany; 8,500 kg in France; 8,000 kg in the UK and the Netherlands; 5,500 kg in Australia; 4,300 kg in Russia and New Zealand; and 2,260 kg in Armenia.

In these circumstances, farms in Armenia use the produced milk and meat for their personal consumption. Moreover, the small volume of milk leads to an increase in its price, making it uncompetitive in the international market.

Milk productivity is mainly influenced by the following three factors: feed quality, the animals’ genetic potential, and how they are cared for. According to the government, the implementation of the smart barn state assistance program will enable the creation of favorable conditions for improving livestock care through the introduction of cutting-edge technologies.

What Is a “Smart” Barn?

The government’s Decision states that barns must have a ventilation system, high ceilings, a tiled milking parlor with drainage, large resting areas for the animals, a wide feeding area, and an area for the animals to wander around in.

Additionally, the structure needs to have fans, energy-efficient lighting, stationary and mobile milking equipment, rubber slats for the animals, a water heater, a manure disposal device, an artificial milk cooling tank, and livestock watering troughs.

Favorable conditions for proper animal care, and maintaining the proper quality of milk will increase productivity, incomes of farmers and the overall profitability of this sector. 

The Amount and Conditions of State Support

The program proposes the following three models of barns to be built through state subsidies:

Model 1: A production area of ​​130-280 square meters, designed for at least 10-15 animals. The costs for construction and technological provision are estimated at around 11 million AMD, half of which will be reimbursed by the state.

Model 2: A production area of ​​281-450 square meters, designed for at least 20-25 animals. The costs for construction and technological provision are estimated at around 23 million AMD, of which 11.5 million AMD will be reimbursed by the state.

Model 3: A production area of ​​451+ square meters, designed for at least 40-45 animals. The costs for construction and technological provision are estimated at around 35 million AMD, of which 17.5 million AMD will be reimbursed by the state.

In cases where the building is larger than those mentioned above, the state will reimburse the maximum amount of 17.5 million AMD.

The Ministry of Economy will be responsible for the reimbursement. The funds will be transferred by the Ministry to the applicant’s account in two tranches: the first tranche to be reimbursed within 10 days after completion of construction (reconstruction) and the positive assessment of the monitoring, to the amount of 50% of the reimbursable amount. The remaining 50% (compensation of the 2nd stage) is 10 days after technological provisions of the barn are in place and operational, and upon receipt of the positive assessment of the second tranche’s monitoring.

How to Apply

In order to participate in the program, individuals or legal entities submit an application to the Ministry of Economy, stating the model of barn they want to build.

The applicant must also present the certificate of registration or ownership (use or lease) of the property where the barn will be constructed or reconstructed. The consent of the property owner for construction/reconstruction shall also be submitted.

Before applying to the program, a person must participate in a training course on livestock management and submit a certificate of participation. The course is organized and the certificate is issued by the National Agrarian University of Armenia Foundation, according to the agreement signed between the Foundation and the Ministry of Economy. The course fee is 40,000 AMD.

Unrealized Expectations

Khachatur Hovsepyan, a resident of Armavir region and a beneficiary of this program, claims to have been deceived by the state.

“Their project was supposed to cost 35 million AMD, but the construction of the livestock building cost me 56 million drams,” Hovsepyan says. “They were supposed to compensate half of the amount they calculated, about 17.5 million, but I had to fight for 2.5 months until I received that amount.” He explains that their reason to withhold compensation was laughable, citing minor things like an improper clamp or bolt. 

Hovsepyan has requested the government explain how they had calculated the cost of the barn as 35 million AMD, but has yet to receive an answer.

“I was deceived; I thought they were offering something good, so I took advantage of it,” Hovsepyan explains. “It seemed completely normal: you want to build a barn, they compensate for a part of it, and it is beneficial for you. But I spent about 30 million drams more. If they had told me that the program would cost me not 34, but 56 million drams, I would not have applied.”

He claims that with the improved animal care conditions, he has yet to see any impact on milk production. 

Another program participant, Mher Kirakosyan, a resident of Kotayk region, applied to the program in the spring of 2020. Kirakosyan had built a larger barn than the buildings defined by the three models. The state reimbursed him with 17.5 million AMD.

He began construction of the barn in February 2021, and has been raising cows in the smart barn since November 2021. At the moment he has 60 cows. He claims he still has no return on his investment and doesn’t believe he will have any in the coming four to five years.

“Currently we barely make enough to buy fodder, although we often borrow that as well. Every month, we borrow between 1.5 and 2 million drams,” says Kirakosyan, adding that they did not forewarn them that they would not make a profit in the first few years. “But we should have known. If you did the calculation, it would be obvious that the cost of keeping so many cows could not justify itself from the start.”

The program envisioned that 230 “smart” barns would be operational throughout Armenia by the end of 2021; as of September 2022, there are only 47 program beneficiaries, less than 20% of the intended scope of the program.

Davit Khachatryan, chief expert in the Department of Agricultural Program Implementation of the Ministry of Economy, says that as of January 1, 2021, roughly 360 applications were received, but later either the applicants failed to submit the necessary paperwork to begin the process or stated that they were having financial difficulties and were unable to complete the construction of the buildings.

According to Khachatryan, 27 of the 47 beneficiaries are already utilizing their barns. Eleven of them completed the construction of the barn this year and have not yet submitted a report on their operation to the ministry, and nine have built the buildings but don’t yet have any livestock. According to Khachatryan, there are also a number of applicants who were approved for the program and although they have started construction of the barns, but have not yet completed them.

Construction has been challenging because of the COVID-19 pandemic (when the government decided to halt construction) followed by the implementation of martial law during the 2020 Artsakh War; later an increase in building material prices further complicated the situation. 

Khachatryan notes that the significant discrepancy between the program’s expected and actual results, cannot exclusively be attributed to coronavirus and the war. “The enthusiasm has gone, and I can’t say why exactly,” he says

Addressing the grievances of the program’s beneficiaries that the pre-calculated costs do not match the actual building costs, Khachatryan notes that the calculations made at the program’s onset were accurate, but over time, prices of products increased, and there is, in fact, a price discrepancy. He said that the ministry is reassessing the costs but was unable to specify what the outcome would be.

Regarding complaints about the delay in reimbursements, Khachatryan claims that the ministry is doing its due diligence and funds are transferred once it is determined that the construction has met the program’s requirements. He also insists that based on reports submitted by other beneficiaries, smart barns were having a positive impact on milk production.

Changes to the Program

According to their contract with the Ministry of Economy, beneficiaries must provide reports on the number of livestock, milk production, etc. In the event of non-compliance of the contract’s provisions, the reimbursement is subject to being returned to the state budget. The contract also stipulates that the barn must be operational within a year of the contract’s signing; however not all applicants were successful in launching operations.

Khachatryan, however, notes that the government has decided to make some amendments to the program and give the project participants who were unable to complete the buildings within a year the chance to do so by 2023 and receive compensation, given that they have already made financial investments.

Law & Society