The Department of Agriculture has admitted that an anomaly in the drafting of the Rural Development Programme has resulted in hundreds of potential food enterprises being left without funding.
The mix up is now preventing former LEADER companies from supporting small rural food producers.
The EU Commission told the Department of Community Equality and Gaeltacht Affairs to instruct the local partnership companies to cease all support for food producers in January this year after the anomaly came to light.
According to the CEO of Laois Partnership, Anne Goodwin, this is devastating news for rural food businesses and for the partnership companies. "If you ask any of the Leader/Partnership companies to name their flagship projects the majority will identify food projects among their big successes."
Maura Walsh, CEO of IRD Duhallow, pointed out that the anomaly at the root of this crisis arises from the way the Rural Development Programme was written. She said that the programme is structured into four parts known as Axes.
Walsh said: "Axis one deals with competitiveness and initiatives such as the Early Retirement Scheme, installation Aid and farm advice. Axis two, which has the biggest budget, covers REPs, Forestry, AEOS and environmental measures, while Axes three and four cover the more non-farming rural development initiatives and farm diversification.
"It is this last axis where the Partnership/Leader companies fit in and this is how we supported food enterprises."
A memo from the Department of Community, Equality and Gaeltacht Affairs to the partnership groups seeking to clarify the situation highlights the complexity of what is involved. There is a list of prohibited products known as Annex one. This detail projects that companies cannot fund.
"The processing of any product that is on the Annex one list which results in another product that is still on the Annex one list is ineligible under Axis three whether that processing is carried out by a farmer or a non-farmer. So the processing of potatoes into crisps is ineligible, similarly milk into cheese or beef animals into steaks."
The memo goes on to state: "The processing of any product that is on the Annex one list which results in a product that is not on the Annex one list is eligible under Axis three, eg milk into flavoured yogurt."
The memo adds that "there are very few products" that are not on the Annex one list.
According to Walsh, the crux of the problem centres on the fact that farm diversification under the new Rural Development Programme is restricted to non-agricultural products.
This is interpreted as excluding food or food products which are to be funded under the competitiveness measure in Axis one.
However, there is no money available for food enterprises in Axis one and the partnership companies have no brief in relation to the axis.
It is understood that discussions are ongoing between the Irish Government officials and the Commission with a view to resolving the issue through the possible reallocation of funds and responsibilities within the programme.