This Bill provides for the amendment and extension of certain provisions of section 6 of the Dairy Produce (Miscellaneous Provisions) Act, 1973, relating to the guarantee which, with the consent of the Minister for Finance, I may give in respect of loans obtained by An Bord Bainne Co-operative Limited.
The board were established by the Irish dairy industry in 1972, on the dissolution of the semi-State predecessor, An Bord Bainne. Essentially, their purpose is to buy and market the dairy products produced by their members. Our production of milk and dairy products is very seasonal. The board's sales, on the other hand, are spread in a fairly even pattern throughout the year. In those circumstances the board must borrow substantially to enable them to purchase their members' produce during the peak production period. Their assets are not as yet sufficient to enable them to borrow to the extent necessary. To assist the board in borrowing, the State guarantee was provided in the 1973 Act and enlarged and extended in 1976 and 1977.
The initial State guarantee provided coverage for borrowings by the board up to a maximum, at any time, of £20 million. This figure was increased to £40 million in 1976. The purpose of the Bill before the House is to increase the level of the guarantee to £90 million and extend its application for a further period of four years to 31 December 1983. The additional four years will give the board a reasonable period to build up their own resources further, so that it will become less necessary to rely on the State guarantee for backing for a proportion of their borrowings.
In the debate in the Dáil, Deputies on all sides drew attention to the importance of the dairy industry. I fully concur. The dairy industry is of central importance to the whole agricultural industry in Ireland. Indeed, its continued expansion is vital for the overall economic and social development of the country. For the industry to prosper, we must have maximum efficiency in processing and marketing. Centralised marketing has a major role to play in this by enabling us to develop and exploit markets in a planned and economical way and earning a respected position for Irish dairy products.
The years since we joined the Community have been ones of extraordinary development for the dairy industry. Milk output has risen by over 40 per cent and the volume of milk produced for manufacturing purposes by over 50 per cent. The value of the milk intake of manufacturing concerns has increased by about 400 per cent in the same period. Marketing this extra production has been a tremendous task. It has been accomplished with signal success and with only minimal sales to intervention. The value of Irish dairy exports in 1972 was £50 million in 1978 revenue from these exports exceeded £450 million. This all indicates the successful role played by Bord Bainne and centralised marketing up to now. I believe that their role will be of even greater importance in the future.
The dairy industry is today facing more difficult and somewhat more uncertain times. We face continued price restraint. Much more importantly, we now face proposals in Brussels aimed at restricting increases in milk production and at reducing the cost for the Community budget of support for the milk sector. In the debate on this Bill in the Dáil, many Deputies underlined the seriousness with which they viewed these proposals. I can assure the House that the Government are fully aware of their serious implications. They are, however, at present only proposals. Negotiations on them have not yet properly begun. In these negotiations, we will be seeking to ensure that, whatever adjustments to the Community's milk policy are made, the interests of the Irish dairy industry are protected. At this stage there is nothing further that I could usefully say on this question.
In my view then, our dairy industry can face the future with confidence. But in the circumstances of the future, efficiency in production, processing and marketing will be of even greater importance than in the past. Bord Bainne's role in centrally marketing the bulk of our exports of dairy products will, therefore, continue to be crucial. The ability of the board to obtain the finance necessary for their operations as easily and economically as possible is of vital importance. For the present, the board need the continuance of the State guarantee for a reasonable portion of their borrowings, if they are to continue to play their role as the central marketing agency in the best and most efficient way. Hence, the proposal to extend the guarantee for four years, with an increased maximum of £90 million.
In addition to its main purpose of enlarging and extending the guarantee, the Bill will, in section 4, also provide two further amendments to the 1973 Act. Up to now, only loans for the acquisition of dairy products were covered by the guarantee. This has proved somewhat inflexible and we now propose to eliminate the arbitrary distinction between loans for the acquisition of dairy produce and loans for the closely linked activities of storage, transportation and insurance of these products. Accordingly, we now propose that loans for all four operations be covered. The second amendment relates to borrowings in foreign currencies. We have recently been advised that an amendment is necessary to remove any doubt that the State guarantee also covers borrowings by the board in currencies other than that of the State. This is now clarified in section 4 of the Bill.
The existence of the State guarantee has enabled An Bord Bainne Co-operative Limited to obtain adequate borrowing facilities to meet their requirements. No claims have been made under the State guarantee and no question of expenditure by the Exchequer has arisen up to now, or is likely to arise in the future. I commend this Bill to the House.