Temper hope for lower rice prices

We will do everything within our power … to make sure the substantial cut in rice tariff will translate to a significant reduction in the retail price of the grain.”

This was the bold promise made by Agriculture Secretary Francisco Tiu Laurel Jr. after the National Economic and Development Authority (Neda) board, chaired by President Marcos, agreed last week to cut the tariff on imported rice to 15 percent from 35 percent to help bring down the price of the staple food to as low as P29 a kilo for poor Filipinos.

Lawmakers also praised the tariff reduction, with Speaker Martin Romualdez noting that it was aligned with the administration’s commitment to make rice affordable for Filipinos. “The import levy reduction and the direct sale of imported rice by the government through its Kadiwa centers should bring down the retail price of rice substantially, especially for consumers,” he noted.

But not to spoil their optimism, consumers should not expect retail prices to go down sharply. While the claim that the tariff reduction will bring down the price of rice may be good publicity for the government, the actual effect of the tariff reduction will be to prevent the price of the commodity in local markets from rising further and continue fueling inflation, with the coming State of the Nation Address of the President next month.

Tariff reduction

Just how much will the local price of the commodity go down? At best, according to the Philippine Statistics Authority (PSA), is a decrease of P6 to P7 a kilo due to the tariff reduction, while the DA said the tariff cut would bring it down by P4 to P5 a kilo.

As Neda Secretary Arsenio Balisacan admitted after the announcement of the new Comprehensive Tariff Program from 2024 to 2028, which also included reductions in tariffs on other essential items in the energy and manufacturing sectors and kept the prevailing low rates on key agricultural products, “if we don’t reduce the tariff, with the increasing world prices compounded by the 35-percent tariff over and above that, prices and inflation will remain to be a very serious problem.”

Data from the PSA showed that inflation rose to 3.8 percent in April, of which nearly half (1.75 percentage points) was due to high rice prices. Indeed, rice inflation was at a high of 23.9 percent in April, although this was slightly lower than the 24.4 percent in March.

Reliance on rice imports

Then there is the persistent problem of unscrupulous traders and middlemen that has kept retail prices of rice elevated. “That the tariff will provide major and lasting relief to consumers is more a shot in the dark than a probable result,” warned national manager Raul Montemayor of the agricultural group Federation of Free Farmers, noting that while the country’s reliance on rice imports has increased, retail prices have also risen.

Jayson Cainglet, executive director of the agricultural advocacy group Samahang Industriya ng Agrikultura, also expressed disappointment over the tariff cut, arguing that lowering rice tariffs before has not resulted in more affordable rice prices and benefited only a few privileged rice importers and traders for the past years.

What needs to be done to bring down prices not only of rice but also of other essential commodities, is to fast-track the implementation of the President’s directive to the DA last April to simplify its policies and procedures on the importation of farm products and remove other non-tariff barriers that restrict or delay their entry to the country.

Bureaucratic regulations

These include quotas, import licensing schemes, and bureaucratic regulations that have the net effect of increasing the cost of imports. Their removal or easing will therefore boost supply in local markets and ultimately bring down prices of essential farm products. However, this should go hand in hand with a decisive move against the alleged cartel that has been controlling domestic prices of rice, a group that has been the subject of numerous congressional inquiries that hardly yielded positive results.

There is a chance for rice prices to decline in the latter part of this year when global prices of the commodity are projected to go down. “It’s already past El Niño and the election in India is over, so all those restrictions and exports of major exporting countries are expected to loosen,” Balisacan said. India, Vietnam, and Thailand are the country’s main sources of imported rice. As for the latest tariff cut, consumers need to temper their hopes that rice prices will fall sharply. The government, for its part, should also buckle down to work on long-term measures to increase farm productivity. Decades of dependence on imports have shown the high risks the country faces when the supply of its staple food is hinged on external events.