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Commentary

Revisit rice tariffication law

04:00 AM October 08, 2019

The whole rationale of Republic Act No. 11203 or the rice tariffication law (RTL) is to provide affordable rice prices for consumers, coupled with the goal of raising the income of palay/rice farmers. These twin objectives of the law would supposedly ensure food security for all, and secure the income of producers and the need of consumers. Supply and demand should always remain balanced. Economists want the public to believe this.

The implementation of RTL in March 2019 has, however, resulted in higher rice prices for consumers but lower palay prices for rice farmers. This is not the balance that economists envisioned from the law.

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The current farm gate price of palay is ridiculously low. It currently sells between P7 and P10 per kilogram (fresh). In Central Luzon, the country’s rice granary, the average price of fresh palay is P10.60 (low P9, high P14). In Cagayan Valley, it costs P12.31 per kg (low P11, high P15). If one compares this with the cost to produce a kilogram of palay at about P12.40 per kg, farmers are losing.

Under this current pricing scheme, no farmer will continue planting rice below production cost. The impact on the farmer household level, such as higher incidence of malnutrition, school dropouts and increased vulnerability to early marriage, are effects that cannot be ignored.

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The National Food Authority (NFA) buffer stocking for 15 days is equivalent to 488,895 metric tons, and the budgetary requirement for palay procurement is only P15.5 billion. The 30-day stock is equivalent to 977,790 metric tons, requiring a palay procurement budget of P31.5 billion. But the government can only provide budgetary support of P7 billion. Under the RTL, the NFA is limited only to maintaining buffer stocks (to be sourced locally) for emergencies and disaster relief. Only one import restriction remains under the RTL, and this is the Bureau of Plant Industry sanitary permit. This is easy to secure.

The recommendation to engage the services of local government units (LGUs) in the market price mechanism seems interesting but problematic. Are LGUs willing and capable to take on the task of buying and selling palay, same as the previous role of the NFA? Do they have the necessary logistics to purchase, store and deliver palay from farm to market places?

A World Trade Organization trade and food security expert has said that the government’s (pre-RTL) tariffication should have looked first into the effects of tariffs before pursuing a rice deregulation policy. The WTO did not require the Philippine government to deregulate the rice industry. What the WTO required was simply to replace quantitative restriction (QR) with tariff as the standard form of global trade policy, and not total rice deregulation measures for the domestic rice industry as now enshrined under the RTL.

This was primarily why the Department of Agriculture (during pre-RTL) had warned of the adverse effects of unilaterally liberalizing the domestic rice industry. As the only “state-trading enterprise notified by the Philippines in the WTO, the NFA has exclusive or special rights or privileges, including statutory or constitutional powers, in the exercise of which they influence through purchases or sales.”

What farmers now recommend to the government and lawmakers is to suspend the RTL implementation during the competitive measures phase, a period crucial to making Filipino rice farmers viable. Filipino rice farmers are not mere recipients of conditional cash transfers. They are key staple food producers. Assistance along the lines of the pre-RTL palay price support of P20.70 will go a long way, especially for cash-starved Filipino rice farmers. Farmers need at least eight cropping seasons (two cropping seasons a year) to become competitive. The government should continue to regulate rice imports and should provide direct farm and market support to farmers.

As with any responsible government, it should keep its option for quantitative restrictions in case of disasters, manmade (such as policy failures) or otherwise.

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Omi C. Royandoyan is executive director of Centro Saka and founding chair of Alyansa Agrikultura.

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