The Federation of Free Farmers (FFF) said the government may lose P548 million, or more than nine-fold higher than the P60-million estimate of the Tariff Commission, if rice tariffs on imports from non-Asean countries would be reduced to 35 percent.
FFF said the total value of rice imports from non-Asean countries last year reached P3.65 billion, which would translate to a tariff collection of P1.826 billion at the current tariff rate of 50 percent.
The group estimated that at 35 percent, tariff collection from non-Asean rice imports would decline to P1.2786 billion, resulting in a difference or an estimated loss of P548.004 million.
FFF’s computation also showed that possible foregone revenue loss from combined rice imports coming from India and Pakistan alone would reach P247.019 million.
“The TC itself concluded that reducing the tariff on Indian and Pakistani rice will just bring their landed costs at par with those from Asean countries,” the group said in a statement.
“Even then, it admitted that any savings on tariffs could be pocketed by traders as additional profits, and would not necessarily be passed on to consumers.”
The BusinessMirror broke the story last week about the findings and recommendations of the TC on the petition of the Department of Agriculture (DA) to lower the in-quota and out-quota tariffs for rice imports from non-Asean countries to 35 percent. (https://businessmirror.com.ph/2021/03/26/govt-to-lose-p60-million-annually-on-lower-rice-import-tariffs/)
The TC said it believes the reduction in the tariff rate of rice imports to 35 percent could lead to lower rice prices as this would translate to cost savings.
“Based on available data, importing rice is a profitable business with estimated profit margins of at least 20 percent. If tariffs are reduced to 35 percent, [the Commission] estimates cost savings of at least 3 percent,” it said in its report, a copy of which was obtained by the BusinessMirror.
“These savings can be retained by traders as additional profits or passed on to consumers in the form of lower prices.”
The FFF also scored the TC for its computation. The group argued that the TC’s computation was “deceptive if not erroneous” as the body used costs as declared by importers which the group claimed could be undervalued and not reflective of actual import costs.
“In addition, the Commission lumped the costing for all grades of rice imports together, despite the fact that more than 96 percent of imports from non-Asean countries were exclusively for well-milled rice grades,” the group said.
“Our computations show that if we use the [Bureau of Customs’] reference prices instead of declared import costs and limit the analysis to rice with only 5 percent brokens, rice from India and Pakistan will still come out cheaper even if we do not change tariff rates.”
The TC said importing rice from Asean, the major source of the country’s rice imports, and India “may soon be a challenge due to the current global economic situation caused by the pandemic and other factors.”
The other factors include natural causes like the monsoon season in India; Chinese dams drying up the rivers in Vietnam and Thailand, which are major sources of the country’s rice imports, as well as ongoing political uncertainties in Myanmar, according to the TC.
“It would be prudent to widen options for supply sources of imported rice given the current circumstances. The current situation of ample rice supply and stable rice prices may not be guaranteed in the short term,” it said. (Related story: https://businessmirror.com.ph/2021/02/01/tariff-cut-to-expand-phl-sources-of-rice-imports/ and https://businessmirror.com.ph/2021/02/05/lower-tariffs-on-non-asean-indian-rice-imports-pushed/).