Article 9
of Commission Decision 88/318/EEC of 2 March 1988 on Law No 64 of 1 March 1986 on aid to the Mezzogiorno (2) authorizing the aid. It has therefore opened the procedure provided for in Article 93 (2) in respect of aids intended for: - the setting-up of a starch factory and of a factory to be used directly or indirectly for the production of isoglucose, - the production of seed oils, - the production of meal and flour, - the setting-up of pig farms, - the establishment of stocks of the products listed in Annex II to the Treaty. As regards the products listed in Annex II to the Treaty, the Italian authorities are required to comply with Article 9 of Decision 88/318/EEC which provides that Italy must respect existing and future Community rules and regulations governing the coordination of different types of aid for the products listed in Annex II. On the basis of the information available to it, the Commission considered that the Italian authorities had not taken account of the prohibitions or restrictions on the grant of aid to the starch, isoglucose, seed oils or pig farming industries or on the establishment of stocks of the products listed in Annex II to the Treaty. In particular they should have notified the programme agreement pursuant to Article 93 (3) of the Treaty, as the Commission had requested them by telex of 14 November 1986, in order to enable it to take a position on aids intended for the products listed in Annex II to the Treaty. The Commission considered also that there were doubts as regards the level of the aids and that insufficient information had been given in support of the aids for research and training. By letter dated 23 November 1990, therefore, the Commission gave the Italian Government notice to submit its comments under the procedure laid down in Article 93 (2) of the Treaty. The other Member States and parties concerned were informed thereof by a notice published in the Official Journal of the European Communities (3). II The Italian Government submitted its comments by letters dated 30 January and 28 May 1991. Eight associations, a firm and Italgrani SpA submitted comments and these were sent to the Italian authorities on 8 April 1991. The Italian Government and Italgrani SpA applied to the Court of Justice of the European Communities for the annulment of the Commission's letter of 23 November 1990 initiating the procedure laid down in Article 93 (2) (see Cases C-47/91 and C-100/91). The information supplied by the Italian Government has enabled the Commission to find that the aid for research (research projects and the funding of research centres) complies with the conditions laid down in Decision 88/318/EEC. The aid for training, consisting of aid for basic training, complies with the specific objectives of the European Social Fund and with the conditions laid down in Decision 88/318/EEC. The aid for seed oils is for the production of highly purified vegetable proteins and lecithins for human dietetic and pharmaceutical use. The highly purified proteins and lecithins, when processed and prepared for human consumption, will form the basis of new foodstuffs intended primarily for catering purposes and as special dietary foods, that will make use of the positive and established features of the active ingredients of soya. The proteins and lecithins are to be extracted and purified by processes which are at the limits of current technology (e.g. using hypercritical gases) that will protect consumers against solvents or other residues harmful to health. In order to obtain these advanced trial products, that are not yet widely available on the market, which is the aim of this part of the project, soya beans will have to be cracked and the oleaginous part removed (approximately 12 % by weight). The removal of the oil is a highly delicate part of the process since residues, however minimal, make the proteins unpalatable and have to be disguised with strong flavouring agents. The production of this oil therefore will only be residual. In view of the above comments, the aids for research, training and seed oil may be regarded as compatible with the common market and qualify for the exemptions provided for in Law No 64/86. III By letters dated 23 and 24 July 1991, the Italian authorities substantially amended the investment programme originally planned and adjusted the relevant aids. The new programme (4) modifies the original project as follows: - the aid for the setting-up of a starch, meal and flour factory is withdrawn, - the aid for the setting-up of large-scale pig farms is withdrawn, - the aid to fund the establishment of stocks of Annex II products is withdrawn, - annual production capacity is reduced from 357 000 tonnes to around 150 000 tonnes, - the investments and aid for the production of sugar-based chemicals are increased and there will be no production of isoglucose, - the investments and aid for the fermentation and citric acid industries are increased, - the aids for research projects are increased. The programme covers the following: (in billion Lit) Type of investment and location of installations Investment sums Total aid Fixed Stocks Total A. INVESTMENTS IN INDUSTRIAL TECHNOLOGY 1. Starch manufacture - Taranto (110,0) - 2. Sugar chemistry - Corigliano Calabro 160,0 160,0 68,13 3. Fermentation, yeast and other - Calabria 70,0 16,0 86,0 37,15 4. Fermentation, citric acid and other - Calabria 50,0 14,0 64,0 29,36 5. Alcohol - Crotone 60,0 20,0 80,0 34,07 6. Vegetable proteins - Manfredonia 80,0 80,0 34,62 7. Biodegradable plastics - Naples 25,0 5,0 30,0 17,21 8. Fruit and vegetable canning - Calabria 10,0 10,0 7,63 TOTAL A 455,0 55,0 510,0 228,17 (in billion Lit) Type of investment and location of installations Investment sums Total aid Fixed Stocks Total B. RESEARCH CENTRES Naples 110,0 110,0 74,98 Eufemia Lamezia 30,0 30,0 21,85 TOTAL B 140,0 0,0 140,0 96,83 C. RESEARCH PROJECTS 125,0 125,0 100,00 D. STAFF TRAINING (INDUSTRY) 40,0 40,0 36,00 GRAND TOTAL A + B + C + D 760,0 55,0 815,0 461,00 The Italian authorities also stated that the above aids, totalling Lit 461 billion, will be granted on condition that Italgrani SpA respects the following conditions in implementing the programme as a whole: - the products processed or derived from starch must be produced solely from starch of Community origin, - Italgrani SpA's starch production under the programme will be strictly limited to the quantities needed to meet its own requirements for the production of products derived and/or processed from starch, - Italgrani SpA will not be able to place on the market any quantity of starch manufactured under the programme. The starch production capacity provided for under the programme amounts to about 150 000 tonnes per annum; the starch factory requires an investment of Lit 110 billion and will be set up at Taranto without recourse to aids. Initially, an investment of Lit 210 billion had been provided for (with aids) to this end and the starch production capacity had been 357 000 tonnes per annum. IV The measures envisaged by the Italian authorities are based on Law No 64/86 and consist of direct subsidies and interest-rate subsidized loans. The Commission regards these measures as aids within the meaning of Article 92 (1) because they give an advantage to Italgrani SpA and some of its products for which there is competition and trade between Member States. The following table shows the Italgrani products and the relative quantities which are the subject of trade between Italy and the other Member States (NIMEXE figures in tonnes for the year 1990): EEC imports to Italy Italian exports to the EEC Italgrani production (1) Maltose 0 28 23 400 High-maltose syrups 15 1 548 36 000 Fructose syrups 4 2 323 18 000 Crystalline fructose 0 1 741 16 200 Manitol 110 894 14 400 Sorbitol 5 716 4 688 27 000 Other hydrogenated glucoses 49 060 51 675 18 000 Glucoses and dextroses abv 1 248 1 825 9 000 Glucose for the light chemicals industry 1 478 16 123 9 000 Fermented yeasts Yeasts 6 637 3 287 16 500 Citric acid 0 7 265 18 000 Vegetable proteins - Texturized protein 1 163 779 112 750 - Lecithin 3 973 3 334 2 610 - Soya oil 4 106 6 047 49 590 (1) The starch production capacity of approximately 150 000 tonnes per annum provided for in the programme does not seem disproportionate by comparison with the quantities of the main products derived and/or processed from starch which Italgrani intends to produce and which are detailed in this column. The Commission does not possess statistical data on production at a Community level of the products benefiting from the aids in question. However, it should be emphasized that glucose factories and their downstream products are part of the starch sector and as such in an industrial sector characterized by a high degree of competition. There are many firms in the sector; they are large and highly capital-intensive units. Italgrani SpA has a relatively significant position in the sector. The envisaged aids in favour of Italgrani would distort normal competition by reducing the costs of its capital investments and giving it an advantage over the other producers who do not have similar advantages. In view of these considerations the aids in question are likely to affect trade between the Member States and to distort competition within the meaning of Article 92 (1) of the EEC Treaty. V