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IN hopes
of easing the burden not only of the poor but also of
the middle class, the national government is now eyeing
to peg commercial rice prices at P35 a kilo.
Acting
Director General Augusto Santos of the National Economic
and Development Authority (Neda) said this was
considered by the Cabinet in its meeting Tuesday to
address the complaints of many middle-income earners on
the prices of commercial rice.
Santos
said the Cabinet is open to using a portion of its
value-added tax (VAT) collections from oil to shoulder
the cost of keeping rice prices at P35 a kilogram (kg).
“We
decided that if the country as a whole targets P35/kg of
commercial rice, [we will be able to ease the burden of
many people]. This is a target and the government will
use the windfall from VAT on oil to help lower
commercial rice prices,” Santos told reporters.
“We need
to determine how we can help the market achieve P35/kg
rice. We are open to increasing the subsidy to make
commercial rice affordable, provided that it is within
budget,” he added.
Santos
explained that while the government is aware that not
all kinds of commercial rice can sell for P35/kg, the
price may be applied to regular-milled rice, which
Santos said is now selling for P40/kg.
The
government still has to draft the mechanics for this
action but Santos said one measure to be considered is
increasing the government’s tariff subsidy of imported
rice.
The
government currently subsidizes a portion of the
50-percent tariff on rice. This, together with the
entire process of importation, is done by the government
through the National Food Authority (NFA).
The NFA
buys rice at a high cost and sells it lower to the
private sector. The average price of imported rice since
the commodity’s prices surged is $1,000 a metric ton or
an average of $1/kg.
At the
current exchange rate, each kilo of imported rice should
be sold at around P40 to P44/kg. But due to the NFA
subsidy, the private sector only buys imported rice for
around P25/kg.
Initially, the government was mulling over the
possibility of increasing the price of NFA rice to
prevent the NFA from incurring more deficits. However,
the Cabinet on Tuesday decided to keep NFA rice prices
at P18.25/kg.
Private
think tank Ibon Foundation earlier said rice imports
could mean as much as a P64.1-billion subsidy for NFA
rice in 2008. This is, however, over five times the
national government deficit in 2007. |
