Government introduces Islamic financing options and water-saving tax breaks for agriculture

The document, published on the official legislative database Lex.uz, outlines a comprehensive support framework to establish 172,000 hectares of industrial orchards and vineyards by the end of 2028 by helping farmers and entrepreneurs replace economically inefficient, low-yield plots.

Starting July 1, the Agro-Industrial Development Agency will hold the authority to officially classify existing orchards as obsolete. The agency will then issue conclusions on whether to replace them with modern industrial orchards or reclassify the plots as arable land.

For plots spanning 5 hectares or more, the modernization process will be driven by private business initiatives. The agency will prepare the necessary technical specifications and feasibility studies free of charge within 15 days. However, the government is introducing strict accountability measures to ensure timely implementation. If a project initiator fails to establish an intensive orchard within 12 months after receiving the agency's official conclusion, the land tax and water-use tax rates for that specific plot will triple. If the delay extends to two years, water supply to the unplanted plot will be cut off completely.

To finance these agricultural projects, commercial banks will issue loans calculated at up to UZS 120 million per hectare. These loans will carry an annual interest rate of 14%, which includes a 4% bank margin. The repayment term is set at 7 years, featuring a 3-year grace period. Borrowers can secure these loans using land lease rights, liquid assets, insurance policies, or other standard forms of collateral. As an added incentive, borrowers who meet their annual payment deadlines on time will receive a 5% rebate on their interest payments as compensation.

Concessional financing at the same 14% annual rate will also be accessible through credit lines backed by international financial institutions specializing in the fruit and vegetable sector. Furthermore, entrepreneurs can tap into these 14% loans to purchase imported fruit tree saplings, with financing capped at $5 per sapling.

To help cover ongoing operational costs, the Agricultural Payments Agency will distribute annual subsidies of up to UZS 5 million per hectare for three years following the establishment of an industrial orchard.

The Ministry of Economy and Finance is allocating substantial capital to back the initiative. The ministry will provide UZS 300 billion for intensive orchard credit lines by the end of this year, followed by UZS 500 billion annually starting in 2027. An additional UZS 100 billion this year and UZS 150 billion in subsequent years will be earmarked directly for intensive orchard development, alongside UZS 20 billion specifically set aside for subsidies and interest compensation.

The president has also instructed commercial banks to introduce Islamic financing options tailored for the purchase of saplings, agricultural machinery, and the installation of water-saving irrigation technologies. An extra UZS 100 billion will be deployed for these Sharia-compliant financial products this year.

To promote sustainable farming practices, the state is offering a major tax incentive. From August 1, 2026, to August 1, 2031, the water-use tax rate will be dropped to a nominal UZS 1 for industrial orchards that successfully adopt water-saving irrigation systems.

These extensive financial mechanisms build upon initial plans reviewed during a presidential meeting in May, where the government discussed mobilizing $2 billion in total investments to overhaul the country's fruit-growing infrastructure.