AS the lifting of the quantitative restriction (QR) on rice is expected to boost government revenues, the state-owned think tank urged the Duterte administration to set aside P18 billion a year to compensate farmers.
‘In a policy note, titled Compensatory payment scheme for rice farmers after tarification, Philippine Institute for Development Studies (Pids) senior researcher Roehlano M. Briones and research analyst Lovely Ann C. Tolin said the removal of the rice QR is expected to boost government revenues due to more rice imports.
At a tariff rate of 35 percent, the government is expected to generate P27 billion to P28 billion in duties from rice imports, which could reach as much as 2.26 million metric tons (MMT) a year.
“Earmarking the rice-tariff revenue to pay for the compensation scheme is a feasible funding strategy. Residual money from the tariff revenues could be used for other product-enhancement measures for rice farmers,” the authors said.
The influx of rice imports, the study stated, will lower paddy rice prices by P4.56 and P6.97 per kilogram at the farm gate and retail level, respectively.
The impact on farmers’ incomes of the removal of the QR, the researchers said, should compel the government to compensate them.
Farmers cultivating 2 hectares of irrigated land should receive around P19,000 a year, according to the study.
“This is greater than transfer per household from the Conditional Cash Transfer (CCT) Program, which is P15,000 for three children. Note that compensatory payments can be received simultaneously with the CCT,” the researchers said.
The researchers said the government can adopt a payment compensation scheme. Between 2017 to 2022, this can be done using the Registry System for Basic Sectors in Agriculture.
Farmers or their heirs can receive compensation which is computed using the National Food Authority’s (NFA) support price of P17 per kg and the cost of production in 2012.
The compensatory payment, the study stated, can be divided by the area harvested. This will be distributed per cropping season or twice a year.
“Tarification of the Philippine rice sector by 2017 is inevitable. Since our analysis suggests massive fall in domestic prices, it is imperative to provide farmers a measure for income support,” the study read.
In October the National Economic and Development Authority (Neda) said the Philippines could impose a tariff of as much as 50 percent once the rice-import quota is removed in July 2017.
A Neda official told the BusinessMirror that the opening tariff that it will impose will be between 40 percent and 50 percent for all imported rice that will enter the country.
A tariff rate of 50 percent is within the bound rate set by the World Trade Organization (WTO). This is, however, higher than the 35-percent inbound tariff imposed on rice shipments from Southeast Asian countries under the Asean Free Trade Agreement.
Economists said, however, that the Philippines may be allowed to impose a much higher tariff if it could justify the need to do so, as in the case of Japan.
When Japan converted its QR on rice to a tariff, Tokyo set an opening tariff of 400 percent.