Report from the Commission to the Council on the use of Community Tobacco Fund appropriations (in accordance with Article 13(1) of Council Regulation (EEC) No 2075/92 on the common organisation of the market in raw tobacco)
Date: 2003-10-13
Institutions: European Commission
Subjects: agricultural quota, fund (EU), management, public awareness campaign, redevelopment aid, redirection of production, smoking, tobacco

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.10.2003
COM(2003)599 final

.

REPORT FROM THE COMMISSION TO THE COUNCIL

on the use of Community Tobacco Fund appropriations

.

(in accordance with Article 13(1) of Council Regulation (EEC) No 2075/92
on the common organisation of the market in raw tobacco)

TABLE OF CONTENTS

1.

2.

Introduction.................................................................................................................. 3

Existing legislation relating to the Community Tobacco Fund ................................... 3

2.1.

Measures under the Fund ............................................................................................. 3

2.1.1. Measures to provide information on the harmful effects of smoking.......................... 3

2.1.2. Conversion measures ................................................................................................... 3

2.2.

Financing the Fund....................................................................................................... 4

3.

3.1.

3.2.

Use of Fund appropriations.......................................................................................... 4

Information measures on the harmful effects of smoking ........................................... 4

Conversion measures ................................................................................................... 5

3.2.1. General framework....................................................................................................... 5

3.2.2. Buy-back of quotas for the 2002 harvest ..................................................................... 6

3.2.3. Allocation of Fund resources in 2003 .......................................................................... 7

4.

Conclusion ................................................................................................................... 8

ANNEX 1................................................................................................................................... 9

ANNEX 2 ................................................................................................................................. 10

2

1.

INTRODUCTION

Following the Council decision of 25 March 2002 (Regulation (EC) No 546/20021) to amend
the  activities  of  the  Community  Tobacco  Fund  and  according  to  Article  13(1)  of  Council
Regulation (EEC) No 2075/92 on the common organisation of the market in raw tobacco2, the
Commission must submit a report by 31 December 2003 on the use of Community Tobacco
Fund  appropriations.  The  present  report,  which  focuses  in  particular  on  the  use  of
appropriations  deriving  from  the  deduction  applied  to  the  2002  harvest,  meets  that
requirement.

The Commission would point out that it has launched an external evaluation of the operation
of the common organisation of the raw tobacco market and that the activity of the Community
Tobacco  Fund  in  previous  years  is  covered  in  this  context.  This  evaluation  will  be  made
public3.

2.

EXISTING LEGISLATION RELATING TO THE COMMUNITY TOBACCO FUND

In  March  2002,  Article  13  of  Regulation  (EEC)  No 2075/92  on  the  Tobacco  Fund  was
substantially  amended  by  Regulation  (EC)  No 546/2002.  These  amendments  concern  the
nature of the measures to be financed and the increase in financial resources.

2.1.

Measures under the Fund

2.1.1. Measures to provide information on the harmful effects of smoking

Measures  to  provide  information  on  the  harmful  effects  of  smoking  continue  to  be
implemented.  However,  their  scope  has  been  extended  in  order  to  take  greater  account  of
developments  in  Community  legislation,  particularly  as  regards  health  warnings4,  and  also
cover the problems of passive smoking and giving up.

2.1.2. Conversion measures

The other measures under the Fund have been entirely redefined. As part of the strategy for
the sustainable development of the European Union, agronomic research has been replaced by
a  new  priority  in  the  form  of  measures  to  support  initiatives  allowing  tobacco  growers
wishing to withdraw from the sector to switch to other crops  and economic activities which
generate employment, as well as studies on conversion opportunities.

1

2

3

4

OJ L 84, 28.3.2002, p. 4.
OJ  L  215,  30.7.1992,  p.  70.  Regulation 
(OJ L 122, 16.5.2003, p. 1).
http://europa.eu.int/comm/agriculture/eval/index_en.htm
Directive  2001/37/EC  of  the  European  Parliament  and  of  the  Council  of  5  June  2001  on  the
approximation of the laws, regulations and administrative provisions of the Member States concerning
the manufacture, presentation and sale of tobacco products (OJ L 194, 18.7.2001, p. 26).

last  amended  by  Regulation  (EC)  No 806/2003

3

                                                
2.2.

Financing the Fund

The  Fund  continues  to  be  financed  by  a  deduction  from  the  premium  paid  to  tobacco
producers.  This  deduction  has  been  gradually  increased,  thus  enabling  more  financial
resources to be made available.

Article 13 in fact stipulates that the amount withheld from the premium will rise from 2% for
the  2002  harvest  to  3%  for  the  2003  harvest.  It  also  provides  for  the  possibility  of  the
premium deduction being set at a level of up to 5% for the 2004 harvest following the report
which the Commission is to present by 31 December 2003 on the use of Fund appropriations.

Article 2 of Commission  Regulation  (EC) No 2182/2002 laying down  detailed  rules  for  the
application of Council Regulation (EEC) No 2075/92 with regard to the Community Tobacco
Fund5  provides  that  expenditure  by  the  Fund  in  each  of  the  two  categories  of  measures
(information  and  conversion)  may  amount  to  a  maximum  of  50%  of  the  Fund  total.  It  also
stipulates that, where the amount available for one of these categories is not used up in full,
the Commission will reallocate the remaining amount to the other, provided that, in the latter
area, there are eligible projects still in need of funding.

3.

USE OF FUND APPROPRIATIONS

On the basis of a 2% premium deduction for the 2002 harvest, the overall amount available
for financing the Fund for 2003 stands at approximately €19 million. Th e equal allocation of
resources to the two categories of measures means that €9.5 million is available for each.

3.1.

Information measures on the harmful effects of smoking

Communication  measures  coming  under  the  Community  Fund  form  an  integral  part  of  the
principal priority measures for the prevention of smoking, as defined in the Communication
from  the  Commission  to  the  Council  and  the  European  Parliament  on  the  present  and
proposed Community role in combating tobacco consumption6.

As  regards  the  use  of  the  Fund  for  information  purposes,  the  Commission  had  in  the  past
decided to finance eighteen multiannual projects with an overall contribution of €13 442 390
from  the  Fund,  following  two  calls  for  projects  published  in  this  context  in  July  19947  and
April 19968.

The fresh impetus which  the Council gave to  the  Fund  in  19989 by  increasing  the  premium
clawback  from  1%  to  2%  made  it  possible  to  consider  larger-scale  measures  aimed  at
providing information on the harmful effects of smoking. Accordingly, on the occasion of the
no-smoking day held on 31 May 2001, a vast anti-smoking campaign targeted at adolescents
in the 12-18 age  group  was launched  in  the  fifteen  Member  States  of  the  Community.  This
campaign  is  the  outcome  of  an  invitation  to  tender  published  in  October  2000.  It  is  being
conducted  over  a  maximum  period  of  three  years  at  a  projected  annual  cost  of  €6  million,
financed  in  full  by  the  Fund.  In  2001,  the  percentage  of  appropriations  committed  stood  at
99.9 %.

5

6

7

8

9

OJ L 331, 7.12.2002, p. 16.
COM(1996) 609 final, 18.12.1996.
OJ C 179, 1.7.1994, p. 8.
OJ C 127, 30.4.1996, p. 15.
Regulation (EC) No 1636/98, OJ L 210, 28.7.1998, p. 23.

4

                                                
In 2002 two new contracts worth €160 000 and 
involved  an  independent  evaluation  of  the  first  year  of  the  information  campaign  and  the
second the organisation of a conference aimed at reaching a consensus on the use of the media
to discourage smoking. The percentage of appropriations committed in 2002 was 96.8%.

€633 000 respectively were signed. The first

In  2003,  in  addition  to  the  measures  under  way,  the  Commission  will  launch  two  new
invitations to tender. It should be noted that the new initiatives tie in more and more closely
with the Commission's legislative and political initiatives. By way of example, two studies are
to be launched, one on the use of  colour  photographs  as part of the information supplied to
consumers on cigarette packets and the other aimed at taking stock of anti-smoking policies
and legislation in the Member States of the Union. These studies fall within the scope of the
follow-up to Directive 2001/37/CE of the European Parliament and of the Council of 5 June
2001  on  the  approximation  of  the  laws,  regulations  and  administrative  provisions  of  the
Member States concerning the manufacture, presentation and sale of tobacco products. They
will cover an estimated budget of €2.1 million.

At the same time, the Commission  will  also  envisage  financing  events  aimed  at  reinforcing
the  communication  measures  under  way  and,  in  particular,  the  anti-smoking  campaign
targeted  at  adolescents.  In  2003  the  percentage  of  appropriations  committed  is  expected  to
stand at 91.5 %. Operational appropriations for the period 2000-2003 are listed in Annex 1.

3.2.

Conversion measures

3.2.1. General framework

The change in the scope of the activities of the Community Tobacco Fund in March 2002 was
radical.  Agronomic  research,  for  which  provision  was  made  when  the  Fund  was  originally
conceived,  was  abandoned  in  favour  of  the  switchover  from  tobacco  production  to  other
activities.

Since  then,  the  Fund  has  financed  individual  projects  and  general  interest  projects  to
encourage raw tobacco producers to switch production, as well as studies on the opportunities
available for converting to other crops or activities in the tobacco-growing areas.

Individual measures comprise:

a)

b)

c)

switching to other crops and improving the quality of agricultural products other than
tobacco, as well as providing incentives to holdings to diversify their activities;

training  for  producers  required  for  a  switch  to  agricultural  products  other  than
tobacco;

establishing the infrastructure for  marketing  quality  products other  than tobacco,  as
well as services for the rural economy and rural people and diversifying agricultural
or  semi-agricultural  activities  with  a  view  to  creating  a  range  of  activities  that
generate  alternative  employment  and  income,  and  in  particular  promoting  tourism
and handicrafts activities.

5

General interest measures and studies comprise:

a)

b)

c)

studies  intended  to  expand  the  opportunities  for  producers  of  tobacco  to  switch
production to other crops or activities;

guidance and advisory services for producers who decide to withdraw from tobacco
production;

conducting innovative experiments for demonstration purposes. These measures may
be accompanied by measures to disseminate the results.

The  maximum  level  of  financing  by  the  Fund  is  75%  of  eligible  expenditure  for  individual
measures (apart from training) and 100% of eligible expenditure for general interest measures
(including individual training) and for studies.

The amount of Community assistance per producer depends on the quantity of the quota for
which the producer has been paid under the buy-back programme. The overall amount is the
sum  total  received  per  tranche  of  the  quota  bought  back.  For  the  tranche  of  up  to  and
including 10 tonnes, the amount of the assistance is three times the amount of the premium,
for the tranche above 10 tonnes up to and including 40 tonnes, it is twice the amount of the
premium, and for the tranche above 40 tonnes, it is equal to the amount of the premium.

For individual projects, total Community support per producer may not exceed €300 000.  A
ceiling  of  €100 000  is  applied  to  measures  not  involving  the  production,  marketing  or
processing of products referred to in Annex I to the Treaty.

After initially drawing up an indicative distribution between Member States of the resources
to  be  allocated  to  measures  under  the  Fund,  the  Commission  establishes  the  definitive
allocation of this funding between the Member States, taking account of the applications for
assistance, on the basis of the quantities irrevocably bought back under the quotas (90 %) and
the national guarantee threshold (10%).

3.2.2.

Buy-back of quotas for the 2002 harvest

The new operational arrangements for the Fund were accompanied by a reinforcement of the
quota  buy-back  programme.  It  should  be  specified  that  the  budgetary  resources  for
implementing  the  programme  come  under  the  budget  heading  "Premiums  for  tobacco"
(heading  050210  01  1710)  and  do  not,  therefore,  exert  pressure  on  the  resources  of  the
Tobacco Fund.

The  Fund  operates  in  strict  synergy  with  the  quota  buy-back  programme  set  up  to  ease  the
conversion of producers who have decided, on an individual and voluntary basis, to withdraw
from the sector.

Accordingly,  tobacco  producers  who  have  been  participating  in  the  buy-back  programme10
and whose quota irrevocably bought back is a quantity equal to or  greater  than  500 kg may
benefit from individual measures under the Fund.

10

Provided for in Article 14(1) of Regulation (EEC) No 2075/92.

6

                                                
In  the  context  of  the  quota  buy-back  programme  for  the  2002  harvest,  quotas  totalling
2 550 tonnes of tobacco were bought back and 1 335 producers withdrew from the sector. The
buy-back, which was directed mainly at quotas in variety groups V and VIII, was successful
in  Italy  and  Greece  (56.8%  and  39.4%  of  the  total  buy-back  respectively),  as  well  as  in
Portugal, Belgium and Austria. However, no quotas were bought back in Germany, Spain or
France. By way of comparison with previous years, 2002 quota buy-backs were seven times
greater than those for the 1999, 2000 or 2001 harvests.

The  improvement  in  the  results  of  the  buy-back  programme  may  also  be  attributed  to  the
opportunities offered by the Fund.

3.2.3.

Allocation of Fund resources in 2003

In  order  to  provide  a  framework  for  implementing  assistance,  in  2003  the  Member  States
drew up conversion programmes and national provisions for carrying out these programmes.

Under the national programmes, on the one hand, producers having withdrawn from tobacco
production  submitted  individual  conversion  programmes  and,  on  the  other,  the  public
authorities  and  public  agronomic  research  and/or  rural  economy  bodies  presented  proposals
for studies or general interest measures.

In  2003,  680  producers  out  of  a  total  of  1 335  who  left  the  sector  under  the  buy-back
programme, i.e. 51%, submitted individual programmes. In all, 14 proposals for studies and
general interest projects were presented in the Member States. The total value of the measures
proposed  was  €19 130 994.  Community  financing  of  €14 993 156  was  requested.  Only
€9 500 000 was available, i.e.  a pproximately 63%  of the resources  requested. The  financing
plans for Fund measures in 2003 are listed in Annex 2.

The  indicative  allocation  of  Fund  resources  between  Member  States  was  set  out  in
Commission  Decision  2003/161/EC11  and  the  final  allocation  in  Commission  Decision
2003/486/EC12.

The average value of individual projects was €20 583. Between Member States, this average
value  varies  between  €7 502  and  €35 990.  On  the 
basis  of  the  projects  presented  it  may  be
concluded that individual conversion  is  generally  geared towards horticulture, cultivation  of
fruit trees, farm tourism and processing of horticultural products.

The general interest projects and studies comprised:

– 

– 

– 

conversion  studies:  identification  of  crops  or  activities  suitable  to  substitute  for
tobacco production (diversification), and agronomic and financial simulations of the
alternatives selected;

setting-up of a conversion help-desk to provide information, training and support for
producers having withdrawn from the tobacco sector;

innovative  experiments  for  demonstration  purposes  as  an  alternative  to  tobacco-
growing.

The average value of  general  interest projects  and  studies  was  €366 769.  By  Member State,
this average value varies between €55 000 and €1 166 667.

11

12

OJ L 65, 8.3.2003, p. 31.
OJ L 164, 2.7.2003, p. 17.

7

                                                
4.

CONCLUSION

An  analysis  of  the  data  on  the  use  of  Community  Tobacco  Fund  appropriations  allows  the
following conclusions to be drawn:

As  regards  activities  relating  to  information  on  the  harmful  effects  of  smoking,  the
measures adopted in recent years have made it possible to devise a sound scheme for the use
of Fund resources allocated for this purpose. In particular, the increase in funding from 1%
to 2% has made it possible to achieve a budgetary threshold authorising assistance for media
measures  which  now  cover  the  entire  European  Union.  In  this  respect,  the  new
communication policy developed under the information part of the Fund also allows efficient
use  to  be  made  of  any  new  increase  in  the  budget.  On  the  basis  of  the  data  and  forecasts
available in July 2003, the 90% rate of use should also be exceeded this year. As regards the
part of the Fund earmarked for conversion activities, the interest shown by producers in 2003
has confirmed that the amendment which resulted in the Tobacco Fund providing support for
the conversion of tobacco-growing areas  has  fulfilled  genuine needs in this field.  The  proof
lies in the fact that the measures financed in 2003 entirely used up the budget resources
allocated for this purpose.

Where the financing of the Fund is concerned, it should be borne in mind that the premium
deduction for the 2003 harvest will rise from 2% to 3%. This percentage increase will boost
appropriations  for  the  2004  budget  from  €19  million  to  €28.5  million,  thereby  making
available sufficient resources to achieve the objectives set.

8

ANNEX 1

Operational appropriations from the Community Tobacco Fund
for information measures (budget heading 050210 02 1750)

(in euros)

Operational appropriations

2000

2001

2002

2003

(at 31/12/2000)

(at 31/12/2001)

(at 31/12/2002)

(at 11/07/2003)

Appropriations for the financial year

3 000 000

7 500 000

9 000 000

10 000 000

Commitments

1 728 591

7 492 234

8 713 174

9 150 000
(estimate)

Rate of commitment of Fund
appropriations

Payments against appropriations for
the financial year

57.6%

99.9%

96.8%

91.5%

815 948

5 861

158 580

Payments against automatic carryovers

292 120

6 315 236

TOTAL payments

1 108 068

6 321 097

8 554 044
(estimate)

8 712 623
(estimate)

Source : DG SANCO

9

ANNEX 2

Financing plans for Community Tobacco Fund measures for 2003

(in euros)

Financing plans

Italy

Greece

Spain

France

Germany

Portugal

Belgium

Austria

TOTAL

Value of individual measures

Conversion/diversification measures (Art. 13(a)*)

5 108 197

7 738 245

28 037

7 502

73 000

12 954 981

Training measures (Art. 13(b))

440 000

Marketing and service measures (Art. 13(c))

578 245

Value of general interest measures and studies

Studies (Art. 14(a))

3 500 000

799 900

34 400

92 000

110 000

286 035

Guidance and advisory measures (Art. 14(b))

55 433

Innovative experiments (Art. 14(c))

217 000

40 000

440 000

23 000

601 245

4 822 335

55 433

257 000

Total value of projects

9 186 442

8 978 145

251 400

92 000

110 000

354 072

62 935

96 000

19 130 994

Community financing requested

7 025 106

7 043 584

251 400

92 000

110 000

347 063

61 060

62 944

14 993 156

Individual measures - number of projects

158

515

Average value of individual projects

35 990

15 880

General interest measures - number of projects

3

1

0

3

0

1

0

2

Average value of studies and general projects

1 166 667

799 900

83 800

92 000

55 000

108 678

55 433

of Regulation (EC) No 2182/2002.

*
Source: Communication from Member States.

10

3

1

3

680

9 346

7 502

32 000

20 583

3

1

0

0

14

366 769